Spotify paying audiobook publishers hundreds of millions annually

• Without Spotify, the audiobook industry in the U.S. grew 14% in unit sales between Q4 2022 and Q4 2023, according to Bookstat. With Spotify, it grew 28%.

While there's been debate around how much authors themselves (not their publishers) are benefiting from that boom, consumers are clearly taking advantage of the expanded access.

• According to internal Spotify data, new audiobook users in the U.S. who are accessing audiobooks through Spotify's premium plan spend an average of five additional hours over their first 60 days since starting a book.
• The company has exceeded its early expectations in terms of engagement, with tens of millions of users listening to at least part of an audiobook à la carte or through their premium subscription since Spotify launched audiobooks in 2022, according to internal data. The company has not yet revealed publicly how many people listen to its audiobooks.

Catch up quick: Spotify launched audiobooks in the U.S. following its acquisition of Findaway, an audiobook platform.

• It made audiobooks available to premium members as part of their subscription packages starting in the U.K. and Australia in October 2023 before eventually expanding the feature to the U.S., Canada, New Zealand and Ireland.

Zoom in: Early success in audiobooks is giving Spotify confidence to expand quickly to new markets, Spotify's head of music and audiobooks David Kaefer told Axios.

• The company said Monday that premium subscribers in France, Belgium, Netherlands and Luxembourg will have access to audiobooks.

Between the lines: Strong engagement also suggests Spotify's audiobook strategy is seeing success as a premium feature, rather than an ad-supported product.

• Right now, "Advertising is not really a model that we're thinking about for audiobooks," Kaefer said.

Zoom out: Spotify's audiobook push follows a years-long foray into podcasting that's only now starting to become profitable. But audiobooks aren't expected to weigh on costs as much upfront.

• The cost structure of audiobooks, CEO Daniel Ek told Axios in July, is also more variable than podcasts, "which helps the gross margin profile as we're growing."

• Ek said audiobook engagement has been a "healthy indicator" of the lifetime value of a Spotify subscription. According to internal data, 58% of listeners on Spotify globally are aged 18–34.
• Launching audiobooks on the back of its podcast platform has helped grow listenership faster.
• "We already know who's interested in listening to spoken word," Kaefer said. He added that Spotify is doing more to promote audiobooks through its podcast platform.

The big picture: Audiobook sales have been steadily rising, in large part due to subscription streamers like Spotify investing more in the space.

• News Corp, for example, said that for the first time last quarter, HarperCollins' digital audiobook revenue was larger than e-book revenue.
• Audiobooks are also helping to revitalize catalog content, similar to the way streaming made old TV shows popular again.
• Of the top 10 audiobooks on Spotify currently, nine are backlist titles, per Spotify's internal data. Six of those 10 were released over five years ago.

What's next: Spotify's entry into the audiobook space is already putting pressure on competitors.

• As of Q4 2023, Spotify had a roughly 11% share of all audiobook units sold in the U.S., according to Bookstat, putting it ahead of Apple. It still lags behind Amazon's Audible, which has long been the dominant player in the space.