Spotify expands in audiobooks

Spotify

Spotify wants to expand quite a bit on the audiobook market and thus has bought Findaway. Findaway is a large audiobook platform that currently adds audiobooks for Apple, Google, Audible, and Storytel. Findaway has around 325,000 titles. With this acquisition, Spotify wants to connect its users more with audiobooks. It is unclear how much the streaming service has paid for the acquisition.

Findaway is a platform that connects authors of audiobooks, distributors, and consumers with each other. Spotify wants to help grow this platform and wants to adds more personalization and discoverability. There have been talks about directly integrating findaway in the Spotify app though.

According to The Verge, Spotify wants more people to find audiobooks and enable creators to enable more audiobooks. The streaming service has 381 million users worldwide. By connecting with Findaway, many users will be able to find audiobooks easier. Since the start of this year, it is possible to listen to audiobooks of Harry Potter and classic ones like Frankenstein. Spotify will also work more closely with Storytel to bring even more audiobooks to its users.

Not only have they been expanding with its music and podcasts. Now Spotify is also making huge strides in its audiobook department.

Spotify has a lot of ambition

Outside of the standard audiobooks, Spotify is making some interesting investments in audio comic books. DC Comics is working on nine shows for Spotify to bring high-quality superhero stories to the platform. While technically labeled podcasts, these are really just audio versions of comic books, and they are an example of what they mean when it says it wants to become a global audio platform.

The big mark against Spotify is its low gross margins. These come from the high payouts it makes to music labels to license their catalogs on Spotify. While this dynamic will probably not change anytime soon, there are two projects Spotify is working on that could improve its gross margins over the long term.

One of these projects is Spotify’s two-sided marketplace, which allows artists to pay to promote their work on users’ homepages or within playlists. Artists either pay for the advertisements themselves or have the labels buy up discovery space in batches. Investors should think of the two-sided marketplace as a way for them to get some of the gross profit dollars back that it lost from the labels.

Secondly, the service is working on an advertising network for podcasts. It is still in the early stages, but if successful the network should have Facebook-like margins at scale since it is essentially just a digital advertising platform in audio form. If this becomes a meaningful part of Spotify’s business, it could drive its overall gross margins closer to 40%, which is what management has guided it to over the long term.

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