June 17, 2024

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Spotify gave subscribers music and podcasts.  Next: audiobooks.

Spotify gave subscribers music and podcasts. Next: audiobooks.

Four years ago, Spotify’s business was stagnant. Apple had overtaken it As the highest-paying music service in the United States, losses have been mounting and customer growth has slowed.

Daniel Ek, the company’s CEO, decided that Spotify needed to transform from a music service into a store for all things audio. The first missing piece was podcasts, a business that helped boost ad sales.

Now Mr. Ek has set his sights on another fast-growing medium: audiobooks.

Spotify said on Tuesday that it will begin offering 15 hours of audiobooks each month as part of its streaming service to Premium subscribers in Britain and Australia. This winter, it will expand the offer to subscribers in the United States.

Spotify’s expansion into books has the potential to change the audiobook retail landscape, a fast-growing publishing sector long dominated by Amazon-owned audio retailer Audible.

In Mr. Ek’s view, Audible’s dominance of audiobooks is reminiscent of Apple’s previous dominance of music and podcasts. Spotify built its business by disrupting the music industry with its monthly subscription and podcast service. Mr. Ek said in an interview that he saw the potential to do the same with audiobooks.

“Similar to music, one of the big problems is: How do you reduce friction?” Mr. Ek said of the audiobooks. “How do you enable consumers to discover amazing new audiobooks in an easy way?”

Having books on Spotify, which has 220 million premium paying members worldwide, can help publishers reach a broad new audience. Spotify has the tools to recommend relevant audiobooks to podcast listeners interested in particular topics, and to promote audio titles to Spotify users who have listened to a podcast featuring an author.

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Spotify will also make algorithmic recommendations for users and share some basic demographic information with publishers, said David Kaefer, head of Spotify’s audiobook business.

Hachette Book Group, whose authors include David Sedaris, James Patterson, and Donna Tartt, puts more than 7,000 books on Spotify.

“I see this as a great opportunity to be in the company of Joe Rogan, Taylor Swift and Beyoncé,” said Anna Maria Alessi, Vice President and Publisher of Hachette Audio.

But there are also concerns that Spotify’s plan, which includes experimenting with a new business model for book sales, could upend the lucrative and growing audiobook business. Instead of paying for each audiobook a customer starts listening to, the company proposed paying for the amount of time a customer listens, according to a review of the publisher’s correspondence with agents, which described the terms.

Spotify said the average audiobook lasts seven to 10 hours, meaning subscribers can listen to about a book and a half a month, but some popular books can last much longer. Subscribers can try as many books as they want, and users who want to listen to more can pay $10.99 for another 10 hours of audiobook content.

Kim Scott, best-selling author ofRadical candor“And a former Google and Apple executive worries that Spotify’s pay-per-listen model may undervalue the work it takes to write a book.

Ms Scott said Spotify’s proposal was reminiscent of the way Apple changed the business model for music sales. Instead of purchasing an entire album for $10, iTunes users can purchase individual songs for 99 cents.

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“This is not a shoot-it-and-repeat moment for publishers; it’s a Pandora’s box,” said Ms. Scott, who declined when her publisher, St. Martin’s Press, asked to include her book. “work only” On Spotify’s streaming service. “Before I made this deal, I would hire a consultant and ask, ‘Is this going to bring in new readers or cannibalize existing sales?’”

Several publishing agents expressed similar concerns but declined to speak on the record due to the sensitivity surrounding the ongoing negotiations. Agents worry that paying publishers for the amount of time people listen to a book could erode lucrative selective payments and push other retailers to follow similar models.

“Audio has been a major driver of growth, so having a more diverse market for audiobooks is a good thing,” said Christy Fletcher, co-head of publishing at United Talent Agency. But she added: “While we all want to reach as many listeners as possible, there is a real risk that this consumption model will devalue authors’ works and become the norm for all platforms.”

Spotify has deals with the five largest U.S. publishers as well as hundreds of others, including smaller companies and self-published authors. It will offer a catalog of over 150,000 titles to get you started. Different publishing companies have different agreements, and some publishers are more cautious than others. Some major companies like HarperCollins and Penguin Random House have put out their entire audio catalogues, while another major publisher, Macmillan, has started with only a small portion of its audiobooks.

Mr. Ek said he heard the concerns of authors and publishers, but believed a 15-hour cap would protect the value of audio titles while attracting new customers.

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“The economics are very favorable for the book industry,” he said. “Everyone got on board because they saw that ultimately, for heavy consumers, this would be a net positive.”