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Spotify’s latest purchase is about becoming the place you listen to everything

Why it bought an audiobook company

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 likely made sense to anyone who’s been paying attention to Spotify’s audio moves, but for those who haven’t, to sum it up plainly: Spotify wants to be the place you consume all audio. This purchase sets it up to achieve that goal. When you open Spotify this time next year, the app will likely highlight an Armchair Expert episode alongside Taylor Swift’s newest single alongside Barack Obama’s newest book. It’ll be a crowded, but potentially powerful, destination.

At the same time, though, Spotify getting knee-deep in audiobooks is a wildly different proposition than podcasts. There are powerful publishers to handle, a separate revenue model, a higher barrier to entry, and lots of IP rights to navigate. In the interest of better understanding why Spotify sees a future in the space, let’s break it down by what you need to know when thinking about this deal.

Findaway is Anchor for audiobooks

Let’s start with the most approachable idea for us podcast folks. Akin to how Spotify bought Anchor to make recording and publishing a podcast easy, Findaway plays a similar role in the audiobook space. Now, it’s not as easy as recording audio on your phone, overlaying some music, and pressing publish to make an audiobook, at least a quality one. Audiobooks often involve a narrator, if not actors, audio clips, and more. It’s usually on the level of a highly produced podcast.

Findaway operates a business called Voices that sets authors up with a narrator and ensures content gets made well, but in exchange, authors pay Findaway to make that happen and use their services. This offers a clear business opportunity for Spotify. It’ll interface with creators, something it already does through Anchor and its music work, and generate revenue at the same time. It likely can improve on Findaway’s tech, too, given that it has an entire team dedicated to cracking on-the-go recording in Anchor.

Once a book is recorded, Findaway can distribute it, too, which generates revenue. This leads us to the next thing to think about in relation to this deal.

Findaway turns Spotify into an audiobook distributor

Spotify will now play an integral role in the audiobook world — major publishing houses entrust Findaway to distribute their content to retailers, libraries, and listening platforms. Unlike in podcasting where hosts have an RSS feed they can input wherever they want their show to populate, audiobook publishers and authors generally work with a distributor to get their content to storefronts and make sure all the data is properly inserted, among other things. Findaway’s solution is called AudioEngine.

Mark Pearson, the CEO and founder of Libro.fm, which sells audiobooks and supports independent bookstores, says this distribution business is critical to consider when thinking about Spotify’s 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] do on the backend is actually not trivial,” he says. “There’s a lot that goes into it with metadata and files and to deliver that in an app format for the listener is really hard work.” This would be a lot of labor for one organization to handle adequately.

One familiar podcasting company is also already working with Findaway for distribution of its audiobooks: author Malcolm Gladwell’s Pushkin Industries. CMO Heather Fain tells me the team partners with Findaway to distribute their audiobooks everywhere other than Audible. The reason to do so is because it’s easier than managing the plethora of places where a book populates. Findaway distributes the audiobooks and makes sure they show up properly across various apps and platforms, including Apple Books, Kobo, public libraries, and Libro.fm. (Yes, there could be a world in which Spotify is providing audiobooks to Apple.) However the distribution deal is structured, Findaway is making money, representing a new revenue line for Spotify.

Finally, there’s one more aspect of this deal to think about: 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 people can get all their audio. It’s a retention strategy — don’t move to Audible for your audiobooks, stay on Spotify — and also might recruit people to the platform if the offering is competitive.

If Spotify sells books a la carte, the margins will be much higher compared to podcasts. Even a CPM of $50 in podcasting means a podcaster is only making five cents per listener. Charging each listener $15 for access to an audiobook is a more lucrative arrangement.

Plus, Spotify gets to double-dip on revenue: anywhere Findaway is involved, Spotify makes money — as a retailer, as well as through audiobook production and distribution.

Looking to the future, I imagine Spotify could end up offering different subscription tiers that allow paying subscribers to download an audiobook a month, a la Audible and others. It could also try to launch an unlimited audiobooks plan, like its Swedish competitor Storytel. There’s also the possibility of Spotify making an exclusives play where it signs deals with publishers and authors to bring books to its platform — a classic Audible move, but one that would make extra sense given Spotify’s penchant for exclusive podcasts. If Spotify can become a main place people buy and listen to audiobooks, in addition to all other audio, it also might be able to strong-arm publishers into putting more books on its platform at more favorable prices.

If Spotify’s pace in the podcasting world is any indication, the audiobooks integration could happen fast. It only took Spotify two or so years to start claiming that it’s the top podcasting app. Can it do the same for audiobooks?

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