Four years ago, Spotify’s business was stagnating. Apple had overtaken it as the top paid music service in the United States, losses were mounting and customer growth was slowing.
Daniel Ek, the company’s chief executive, decided that Spotify needed to transform from a music service into the everything store for audio. The first missing piece was podcasts, a business that has helped boost ad sales.
Now Mr. Ek has set his sights on another rapidly growing medium: audiobooks.
On Tuesday, Spotify said that it would begin offering 15 hours of audiobooks each month as part of its streaming service for premium subscribers in Britain and Australia. This winter, it will expand the offering to subscribers in the United States.
Spotify’s expansion into books has the potential to shake up the retail landscape for audiobooks, a fast-growing segment of publishing that has long been dominated by the Amazon-owned audio retailer Audible.
In Mr. Ek’s eyes, Audible’s audiobook dominance is reminiscent of Apple’s past control over music and podcasts. Spotify built its business by disrupting the music industry with its monthly subscription service and podcasts. Mr. Ek said in an interview that he saw the potential to do the same with audiobooks.
“Similar to music, one of the big problems is: How do you lower the friction?” Mr. Ek said of audiobooks. “How do you enable consumers to discover amazing new audiobooks in an easy way?”
Daniel Ek, the chief executive of Spotify, has set his sights on audiobooks. Credit…Ilya S. Savenok/Getty Images
Having books on Spotify, which has 220 million premium paying members worldwide, could help publishers reach a vast new audience. Spotify has the tools to recommend relevant audiobooks to podcast listeners who are interested in particular subjects, and to promote audio titles to Spotify users who have listened to a podcast featuring an author.
Spotify will also make algorithmic recommendations to users and share some basic demographic information with publishers, said David Kaefer, the head of Spotify’s audiobooks business.
Hachette Book Group, whose authors include David Sedaris, James Patterson and Donna Tartt, is putting more than 7,000 books on Spotify.
“I see this as a huge opportunity to be in the company of Joe Rogan, Taylor Swift and Beyoncé,” said Ana Maria Alessi, the vice president and publisher of Hachette Audio.
But there’s also concern that Spotify’s plan, which involves experimentation with a new business model for book sales, could upend the lucrative and growing audiobook business. Rather than pay for each audiobook a customer begins listening to, the company has proposed paying for the amount of time that the customer listens, according to a review of a publisher’s correspondence with agents, which described the terms.
The average audiobook lasts seven to 10 hours, Spotify said, which means subscribers can listen to about one and a half books per month, but some popular books can run for much longer. Subscribers can sample as many books as they want, and heavy users who want to listen to more can pay $10.99 for another 10 hours of audiobook content.
Kim Scott, the best-selling author of “Radical Candor” and a former executive at Google and Apple, is worried that Spotify’s pay-as-you-listen model could devalue the work that goes into writing a book.
The proposal that Spotify has advanced is reminiscent of the way Apple changed the business model of music sales, Ms. Scott said. Rather than buying a full album for $10, iTunes users could buy individual songs for 99 cents.
“This isn’t a launch and iterate moment for the publishers; it’s a Pandora’s box,” said Ms. Scott, who had declined when her publisher, St. Martin’s Press, asked to include her book, “Just Work,” in Spotify’s streaming service. “Before I did this deal, I’d hire a consultant and ask, ‘Is this going to bring in new readers or cannibalize existing sales?’”
Several publishing agents shared similar concerns but declined to speak on the record because of the sensitivity around ongoing negotiations. The agents worry that paying publishers for the amount of time that people listen to a book could eat into lucrative à la carte payments and drive other retailers to pursue similar models.
“Audio has been a major driver of growth, so having a more diversified marketplace for audiobooks is a good thing,” said Christy Fletcher, a co-head of the publishing division for United Talent Agency. But she added, “While we all want to reach as many listeners as possible, there is a real risk that this consumption model devalues authors’ work and becomes the norm for all platforms.”
The new model promises to be less cumbersome than Spotify’s initial foray into audiobooks last fall, when it introduced purchases that required users to pay for each title and complete several steps before they could listen.
Spotify has struck deals with the five biggest publishers in the United States as well as hundreds of others, including smaller companies and self-published authors. It will offer a catalog of more than 150,000 titles to start. Its agreements with different publishing companies vary, and some publishers are being more cautious than others. Some big companies like HarperCollins and Penguin Random House have put their entire audio catalogs in, while another major publisher, Macmillan, is starting with just a fraction of its audiobooks.
Mr. Ek said he had heard the concerns from authors and publishers but believed that the 15-hour limit would protect the value of audio titles while drawing in new customers.
“The economics are very favorable to the book industry,” he said. “Everyone got on board because they see that ultimately, for heavy consumers, this is going to be a net positive.”
