Late last year, Spotify began offering its premium subscribers a 15-hour monthly audiobook in select markets, and now the company says the new service is the second-largest audiobook provider behind Amazon-owned Audible — Spotify CEO Daniel Eck said. “How entrenched legacy players are” is notable. In its Q4 2023 earnings call with investors, the company provided a glimpse into how Spotify customers are consuming audiobooks, including sharing insights that indicate books are reaching a different audience than on other platforms.
“The exciting part is that we're able to bring a whole new audience to audiobooks. So I think the kind of titles that resonate with consumers, both internally and externally, are the most surprising. These are not the usual titles that traditionally do well,” said Ek.
“It's a lot of fun. It's very much a culture thing,” Ek notes. “And a lot of young writers, even new writers, have had the pleasure of giving you a model where you can take a chance on a new book without eating credits, which I think leads you to a much safer bet,” he added. “So we're seeing a very interesting trend around content consumption that I believe is addictive for the entire book industry.”
On Audible, subscribers can access a limited selection of audiobooks and originals, or pay more to get monthly credit to buy an audiobook from a larger selection of bestsellers and new releases. This model encourages users to spend their credit on top performing titles or known authors. But in Spotify's plan, users have a certain number of monthly hours available to listen to an audiobook. This led them to explore lesser-known titles and those from emerging writers, Spotify explained. They are also interested in listening to audiobooks about music-related topics such as entertainment and culture, for example.
Investors had a lot of questions for Spotify about the new audiobook offering, leading Spotify to share its overall views on how both consumers and publishers are adapting to the new format. Later, Spotify said publishers and authors were excited about the innovation offered by its subscription and were “very open-minded” about trying new things.
Additionally, user engagement with the feature is strong, Spotify shared, though specific metrics are lacking.
However, the streamer stopped short of detailing how the addition of audiobooks is adding to its bottom line, making it too early to tell. Instead, Eck suggests, generally speaking, the more engagement on the platform, the better Spotify's value proposition is for consumers. The company added 28 million users in the quarter, the second largest gain in the company's history. The service now has 602 million users, including over 236 million paid subscribers with access to the audiobooks service.
The company declined to answer specific questions from investors about the impact of audiobooks consumption costs on margins, but Spotify expects gross margins to improve through 2024.
A tease of what's to come for the format was hinted at in a question about Spotify's popular Daylist, a personalized audio playlist that tries to predict your mood at various points throughout the day. People are coming to Spotify specifically for the feature, and searches for the term “daylist” have increased by over 2,000%, the company said. Now it looks like Spotify is thinking about how to translate Daylist's success to new formats.
“I'm really proud of the team and what they're doing in this segment,” said Ek, the team behind the feature. “And it wouldn't surprise me to see more innovative things come out of that — both, of course, on the music side, but then on the podcasting side, reflecting the audiobook side as well,” he suggested.