An Evercore ISI analyst expects the effort to be a higher margin business than its music offerings, while a Morgan Stanley expert highlighted the opportunity: 'The audiobook market is roughly $5 billion today but the global book market is $140 billion.'
Warner Bros. Discovery’s France, Benelux and Africa Boss Pierre Branco to Exitgiving paid subscribers 15 hours of free listening per month mean for the music streamer’s business and financials? That was the topic of Wall Street debate following the company’s unveiling of its plan that was rolled out in the U.K. and Australia on Tuesday, with other markets, including the U.S., expected to follow this winter.
“We believe announcement is a different circumstance versus podcasts in 2018 given 1) the audiobook market is relatively more established to date, 2) Spotify has not established any original and exclusive audiobook licensing agreements to date, and 3) existing technological infrastructure is already in place to support this offering,” the expert wrote.
The expert even sees potential implications for Spotify’s relationship with music labels. “Recall that Spotify is raising prices in most markets. There’s much debate on whether price increases impact label royalties, with most concluding that royalties are basically unchanged, though there is likely more on the table ,” Cahall wrote. “One potential implication is whether any premium revenue will be carved out of royalties for audiobooks.
Second, Swinburne sees no “incremental risk” to Spotify’s financial targets, arguing that this product launch was likely “factored into both 2023 guidance and the intermediate and long-term plans laid out last summer” at an investor day. The COVID pandemic boosted audiobook consumption. “Audiobooks had been around for a long time already, with Audible leading the charge, but it was the sudden increase in non-allocated time that people found themselves with that triggered a coming of age for the format,” Mulligan highlighted. “Listening surged, including of podcasts, but as normal life slowly returned, audiobook consumption dipped again, though to a higher point than pre-pandemic levels.
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