Spotify has announced that they are going to be implementing a freemium model for audiobooks for people who are not a paid subscriber. So when the company eventually incorporates a million audiobook titles from their purchase of Findaway, you will be able to listen to them, while having ads play during playback.

“We’ve moved from being a music discovery and playback service, to a fully-fledged platform where artists and creators can create, engage, and earn,” Spotify CEO Daniel Ek said during the company’s annual Investor Day on June 8. “A platform fueled by subscription, advertising and creator service models, applied to music, podcasts, audiobooks and more.” While it’s still early,” he said, “we expect audiobooks to also have healthy margins, above 40% and be highly accretive to the business. And here again, we will apply the same differentiating foundations of ubiquity, personalization, and Freemium to attract both creators and users, and drive engagement.”

Spotify getting involved in the audiobook space was a forgone conclusion, when they announced they were purchasing Findaway for an undisclosed sum. They were one of the largest audiobook distributors that powered the catalog of Kobo, Google, Scribd, Barnes and Noble and dozens of others. The deal officially closed on June 16th, 2022. There’s substantial opportunity in the space, Spotify says, noting the audiobooks market is expected to grow from $3.3 billion to $15 billion by 2027. The next step to integrate audiobooks into the Spotify system and then they will be heavily competing against Audible.

Exactly how Spotify will monetize audiobooks is uncertain. Thousands of them will be played with ads, but what about paid subscribers? There is a huge gulf between indie authors who self-publish their own titles and ones issued by major publishers who have tremendous production values, highly skilled narrators and are bestsellers. Top-tier audiobooks retail on their own anywhere between $15 to $50 each. The highest tier Spotify subscription is $14.99, so if they gave their entire catalog away for paid members, they would dominate the industry. They own the distribution platform, but they would still have to pay royalties to the publisher and author. Exactly how these semantics would play out is currently unknown. They don’t exactly have a system to charge people credits, so if they wanted to implement one, it would take time. Would Spotify develop a new audiobook only subscription tier or even charge for audiobooks?

There are too many unknowns right now. Spotify buying Findaway gives them a huge catalog of audiobook titles, both from indie authors and major publishers. They still have to keep the existing contracts and respect the digital distribution models. Scribd for example, charges a monthly fee for unlimited audiobooks on the platform, but if you listen to too many of them, they throttle users accounts, so they don’t see the whole catalog anymore, and can only listen to certain things. This is because after a certain number of listening minutes by user, Scribd has to pay the publisher for the entire audiobook, which is Findaway and then Findaway pays the publisher. Almost everyone else either charges credits, such as Kobo or sells them ala carte such as Apple Books, Google Audiobooks, B&N Audiobooks etc.

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