Last week, Spotify announced plans to spend an undisclosed amount of money to acquire Findaway, an audiobook creation and distribution company that plays a major role in the industry. The announcement probably made sense to anyone who paid attention to Spotify’s audio movements, but for those who didn’t, to put it simply: Spotify wants to be where you consume all audio. This purchase achieves this goal. When you open Spotify around this time next year, the app will likely highlight a Chair expert episode alongside Taylor Swift’s latest single alongside Barack Obama’s latest book. It will be a crowded, but potentially powerful destination.
At the same time, however, Spotify sinking into audiobooks is a very different proposition than podcasts. There are powerful publishers to manage, a distinct revenue model, a higher barrier to entry, and plenty of intellectual property rights to navigate. In order to better understand why Spotify sees a future in space, let’s break it down into what you need to know when thinking about this deal.
Findaway is an anchor for audiobooks
Let’s start with the most accessible idea for us podcasters. Similar to how Spotify bought Anchor to make it easier to record and publish a podcast, Findaway plays a similar role in the audiobook space. Now, it’s not as easy as recording audio to your phone, layering music, and hitting publish to make audiobook, at least quality. Audiobooks often involve a narrator, or even actors, audio clips, etc. This is usually at the level of a highly produced podcast.
Findaway operates a business called Voices that sets up writers with a narrator and makes sure the content is done right, but in return the writers pay Findaway to make it happen and use their services. This offers a clear business opportunity for Spotify. It will interface with the creators, which it already does through Anchor and its musical work, and generate income at the same time. It may also improve Findaway’s technology, given that he has a whole team dedicated to recording on the go in Anchor.
Once a book is registered, Findaway can distribute it as well, which generates revenue. That brings us to the next thing to think about in relation to this deal.
Findaway turns Spotify into an audiobook distributor
Spotify will now play a pivotal role in the audiobook world – major publishers outsource their content distribution to retailers, libraries and listening platforms to Findaway. Unlike podcasting where hosts have an RSS feed that they can grab wherever they want their show to run, audiobook editors and authors typically work with a distributor to get their content to storefronts and ensure that all data is correctly inserted, among other things. Findaway’s solution is called AudioEngine.
Mark Pearson, CEO and founder of Libro.fm, which sells audiobooks and supports independent bookstores, says this distribution business is essential to consider when thinking about the Spotify deal. His platform works with Findaway to bring books to the Libro.fm app in some cases, and he says the reason many publishers distribute through Findaway is because “what we [on the app side] doing it on the backend is actually not trivial, âhe says. âThere’s a lot to do with metadata and files and delivering that in an application format for the listener is really tough work. It would be a lot of work for an organization to manage properly.
A familiar podcasting company is also already working with Findaway for the distribution of its audiobooks: Pushkin Industries by author Malcolm Gladwell. CMO Heather Fain tells me that the team is partnering up with Findaway to distribute their audiobooks anywhere other than Audible. The reason for doing this is because it’s easier than dealing with the plethora of places a book fills up. Findaway distributes audiobooks and makes sure they display properly on various apps and platforms, including Apple Books, Kobo, Public Libraries, and Libro.fm. (Yes, there could be a world in which Spotify provides audiobooks to Apple.) Regardless of the structure of the distribution agreement, Findaway is making money, which is a new line of revenue for Spotify.
Finally, there is another aspect of this agreement to consider: Spotify will become a bookseller.
With Findaway on its side and audiobooks now seemingly a priority, Spotify will likely start selling them from within the app. This could be essential for Spotify in its quest to be the place where people can get all of their audio. It’s a retention strategy – don’t switch to Audible for your audiobooks, stay on Spotify – and can also recruit people to the platform if the offering is competitive.
If Spotify sells pay-per-view books, the margins will be much higher compared to podcasts. Even a $ 50 podcasting CPM means a podcaster only earns five cents per listener. Charging each listener $ 15 to access an audiobook is a more lucrative arrangement.
Plus, Spotify can double its revenue: Wherever Findaway is involved, Spotify makes money – as a retailer, as well as through the production and distribution of audiobooks.
Going forward, I imagine Spotify might end up offering different subscription levels that allow paid subscribers to download one audiobook per month, a la Audible and the like. It could also try to launch an unlimited audiobooks package, like its Swedish competitor Storytel. There’s also the option for Spotify to do an exclusive piece where it signs deals with publishers and writers to bring books to its platform – a classic Audible move, but one that would make additional sense given the leaning of Spotify for exclusive podcasts. If Spotify can become a primary place for people to buy and listen to audiobooks, in addition to all other audio files, it could also inspire publishers to put more books on its platform at cheaper prices.
If Spotify’s pace in the podcasting world is any indication, the integration of audiobooks could happen quickly. It only took two years for Spotify to start claiming that it is the best podcasting app. Can it do the same for audiobooks?