In its recent quarterly earnings, Spotify announced it has become the top platform for podcast consumption in the US and other more than 60 countries. And a few weeks after it announced two deals into audiobooks expansion on its network. If you are serious about audio, it’s worth following what Spotify is doing.
Since podcasts have been around, Apple has been the unofficial chaperone of the industry. In addition to keeping an open database, it was the first big tech company that provided a podcast app in the default setup of smartphones.
During the last few years, as Spotify began investing heavily into podcasting, Apple Podcasts began losing ground.
Some countries started to report more listeners coming from Spotify than Apple and recently the European audio streaming giant has conquered the US in terms of unique listeners.
Experts say Apple Podcasts still account for more listening time than Spotify, at least in the countries where podcasts are more widely consumed.
It is no secret Spotify wants to be the no.1 audio network in the world. Arguably, YouTube holds that title at the moment as 1 billion visitors come to YouTube for music each month, according to Google (at least that was the case in 2019). Meanwhile, Spotify is just shy of 400 million overall active users.
So, why are audiobooks so important to Spotify now?
The next hot audio content: audiobooks
As far as I am aware, audiobooks have been scattered around Spotify for a few years. In 2018, the Book Riot website detailed how to find them.
In May 2021, Spotify announced a partnership with Storytel, a Swedish audiobook streaming subscription service. It allowed existing Storytel subscribers to connect their accounts and listen to audiobooks within Spotify’s app.
Unlike the most popular audiobook streaming service Audible from Amazon that offers monthly credits which users can use to buy titles, Storytel offers instant and unlimited access to more than 500,000 audiobooks on a global basis across 25 markets.
In November 2021, Spotify announced it will acquire Findaway, an audiobook company that handles audiobook distribution and creative services.
“It’s Spotify’s ambition to be the destination for all things audio both for listeners and creators. The acquisition of Findaway will accelerate Spotify’s presence in the audiobook space and will help us more quickly meet that ambition,” said Gustav Söderström, Spotify’s Chief Research & Development Officer.
To really understand all these steps, compare two numbers – the entire audiobook ecosystem is worth $3.3 billion (around €2.9 billion) and is expected to grow to $15 billion by 2027 (around €13.1 billion). And the second number, the podcasting market is poised to surpass the $1 billion watermark in 2021 for the first time.
As a market, audiobooks are at least 3 times bigger than podcasting. That doesn’t mean more people listen to audiobooks than podcasts. Because audiobooks are almost sold directly as regular books unlike podcasts with the ad-first revenue income source, that’s why that business is much bigger.
Also, Findaway’s acquisition means Spotify wants to become, similar to Amazon, a publisher as well.
More from The Fix: The next big business for news publishers? Some say books
Another piece of the puzzle can be found in this Publishers Weekly’s list of AI companies that focus on audiobook creation by using text-to-speech (TTS) software.
According to Publishers Weekly, brand-name talent is paid $1,000 or more per finished hour of the audiobook, with added post-production an audiobook will cost north of $5,000. Amazon’s Audible uses royalty sharing or an upfront fee, similar to Findaway’s approach which creates an average audiobook (~ 50,000 words) for costs of between $1,000 and $2,000.
So there are obvious incentives to speed up the process of audiobook creation and also bring down the cost. I bet that in the near future, Spotify will either acquire one of the companies on the list above mentioned or build that muscle in-house.
Undoubtedly, audiobooks are good business and will become even more popular once Spotify starts to offer them within its app. At the moment it is not clear whether a new subscription tier will be added or users will have to buy credits just like on Audible.
For any publisher that has an inhouse book publishing division, Findaway will open the doors to 400 million Spotify users and other publishing partners all over the world. Although this is less compelling in my opinion.
The real opportunity I think lies within the newsrooms that have built up podcasting studios over the past few years. Just think about how many hours a day your studio is not being used, I bet it’s lots.
If you have a podcast audience and are publishing books by your authors, adding audiobooks to your premium subscription offering would be a good way to boost their engagement. And by now everyone should know engaged readers don’t churn as easily.
Distributing the audiobook further or even translating it into English would provide additional benefit.
Short-form audio is waiting to be conquered
And then there is the short-form audio that no one has really cracked yet.
Audio articles are slowly starting to take off, although for now it is still being tested by some of the biggest news publishers.
The two big providers of read-aloud text are Amazon (used by Washington Post and others) and Google (used by Forbes and others). There are also other providers, like Veritone’s Marvel.ai used by some podcasters not only to read aloud but also to translate the audio with the use of a hyper-realistic synthetic voice. More on that sometime in the future.
Finally, the very short audio form has yet to go mainstream. NiemanLab wrote that the dream of customized audio news isn’t working out as 9to5Mac reported that Google Assistant has removed “Your News Update”, its algorithm-customized audio news briefing.
Google has shut down the service after two years with no future plans announced and many have taken it as a sign of failure. Originally, it offered a mix of short news stories chosen at that moment based on users’ interests, location, user history, and preferences, as well as the top news stories out there.
NiemanLab’s Joshua Benton made a fair assessment that Google knows algorithms and if it couldn’t figure out a way the issue is much harder to solve than it appears.
Still, something was missing in that conclusion. I believe Google was early to that process and I am not sure it is the best tech company to figure it out (sure, the brain/AI power is there, but not the incentives). Short-form audio briefings have yet to take off. Why?
For one, I would bet on Spotify as it incentivized the most to figure it out and is already running a worldwide experiment with its personalized Daily Drive playlist. Listeners get a personalized audio feed that blends music and news in one place for the perfect commute experience. Some publishers are creating short-form briefings to get into the mix.
More from The Fix: Why is Sweden the world leader in podcast listening?
Maybe one day there will be a system clever enough to select the right news headline, create a clever summary and use a hyper-realistic synthetic voice to read it aloud and serve it to the right audience. But I believe Spotify’s vision with the Daily Drive and publisher’s opportunity to reach audiences through that are much closer even in countries where it hasn’t launched yet.
Finally, I think to make short-form audio mainstream you have to have a kind of social network where it can live natively or is part of an existing network not as a second-class citizen.
On the first note, a Berlin-based social audio startup Beams is building a platform for sharing and consuming short-form audio recordings. It just doubled its seed funding, added another $3 million, has 40,000 unique users and over 5,000 groups.
It’s just one of the audio-first platforms being built now and has no immediate plans for monetization but it shows their investors that also believe the short-form audio space is not conquered yet.
On the second note, in April 2021, Facebook announced it is testing Soundbites, “short-form audio clips for capturing anecdotes, jokes, moments of inspiration, poems, and many other things”. Once they are rolled out, audio could be perceived along with text, images and video as a first class citizen on the biggest social network in the world.
Many publishers already create a lot of audio so the next step should be for them to build up the muscle to also produce short clips. At the moment, creating an audiogram is still the best option but soon good clips may bring new audiences in the forming of short audio ecosystems.