Aside from Netflix’s big subscriber surprise last week (or not a surprise if you follow LikeFolio), the streaming industry’s growth is tempering.
Streaming video content, that is.
But it looks like another streaming segment is just getting started: Audiobooks.
In 2021, global audiobook sales rose 25% to $1.6 billion. It marked the 10th straight year of double-digit percentage growth.
From 2022 to 2030, the audiobook market is projected to grow at a 26% CAGR to $35 billion.
This makes sense.
Mentions of downloading, buying, or reading an audiobook have increased in each of the last 5 quarters.
By end of next month, social media audiobook mentions are projected to jump 51% over an 18-month period. At the current pace, they will exceed Spring 2020 lockdown levels.
And big players are taking a…creative bite.
Earlier this month, Apple unveiled a new catalog of audiobooks narrated by artificial intelligence. Shakespeare meets ChatGPT, if you will.
It’s a desperate attempt to shake up a rapidly growing audiobook market that is experiencing a remarkable resurgence. Since producing an audiobook with a human voice can take weeks and cost publishers thousands of dollars, the idea is that AI will cut costs and give Apple an edge.
The strategy has received mixed reviews.
1) It threatens to put professional voice actors out of work and 2) it revived conversations related to Apple’s app store policies that Spotify and others allege are anti-competitive.
But here is the important question…
Why is Apple struggling to gain a foothold in this lucrative media category when its iPhone is in the palm of more than 120 million American hands alone?
Amazon (AMZN) and Spotify (SPOT) got a head start.
The Audiobook Market Has Two Clear Leaders
Amazon’s ‘Audible’ is winning over audiobook fans in a big way. Over the past 90 days, Audible mentions are exceeding all audiobook services in our coverage.
Consumers like the platform’s growing selection of audiobooks and podcasts. Originals like “The Decision: Overcoming Today’s BS for Tomorrow’s Success” written and narrated by Kevin Hart are big differentiators.
Spotify Audiobooks is also becoming a formidable challenger to Audible. (More on that below.)
Both platforms make up 90% of audiobook demand mentions combined.
Spotify’s Audiobook Strategy is Spot On
Unlike Apple, Spotify is showing that getting a late start in the audiobook market doesn’t close the book on success.
The company has already amassed a large portion of audiobook consumption mentions, and its product is very new.
Last September, Spotify announced a plan to bring over 300K audiobook titles to U.S. customers. A company executive called audiobooks a “substantial untapped market”. He noted that the audiobook segment is growing around 20% annually but makes up just 6% to 7% of the overall book market.
Since then, buzz around Audiobooks has exploded. Just in time for the holiday shopping season, mentions skyrocketed 417% QoQ in the Sept. 1 to Dec. 1 period. They’ve leveled off in recent weeks but are still up 287% YoY.
Can Spotify duplicate its success with podcasts in audiobooks?
Based on the early consumer response, maybe so.
Consumers love how well-organized and convenient Spotify’s audiobooks library is. It allows you to bookmark the place you leave off, control your listening speed, and download additional offline line audio content. One user wondered how he’ll switch from Amazon Audible…
Spotify Audiobooks is also getting high marks for its ability to set the stage. Especially with action-packed drama books, it can be a challenge to make the listener feel engaged. Spotify seems to be nailing it…
Of course, price matters too.
In contrast to Audible’s $7.95 monthly fee (or $22.95 Premium Plus fee), Spotify Audiobook charges by the book. Prices range from $3 for shorter works like children’s books to around $40 for megahits like Game of Thrones.
The good news is, once you buy it, you own it. With Audible you’re paying for unlimited access that lasts as long as your subscription. The Spotify a la carte model seems to be attracting customers.
Price is especially important to visually impaired folks that can have a hard time finding affordable audiobooks.
Where Spotify has an instant edge over Amazon is selection. Audible has a little over 200K titles, shy of Audiobooks' initial 300K+ drop.
From sci-fi and fantasy to mystery and romance, consumers are already falling in love with Spotify’s extensive assortment.
It remains to be seen if Audiobooks can help revive Spotify’s stock, which is down more than -70% from its 2021 peak.
If Audiobooks can amass a large customer base to complement the music business, it will be tougher for digital advertisers to ignore once the ad spending environment improves.
At the end of January, we’ll get a first glimpse of management’s take on Audiobook traction when Spotify reports Q4 earnings.
While the business may still be too small to move the needle, Spotify’s entry into this growth market looks promising. The company plans to launch Audiobooks in new markets and introduce new features along the way.
And in the meantime, Apple (AAPL) has some serious catching up to do…