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Spotify’s publisher dilemma: Audiobook bundling makes music publishers mad — is all-in-one audio sustainable?

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Photo of Rutger Rosenborg
by Rutger Rosenborg

Try as you might, you cannot make everyone happy. Spotify is learning that the hard way as the company tries to make the case for audiobooks to users, shareholders, and the book publishing industry — all while trying to maintain its complex relationship with the music industry. The difficulty stems, in part, from the all-in-one audio strategy that Spotify is pursuing, offering music, podcasts, and audiobooks in the same app and for the same low price. 

The benefit of an all-in-one offering is rapid user conversion and increased in-app engagement, but the drawbacks can range from audio substitute threat to overextension and over-diversification. While the outlook for audiobooks is rosy for Spotify right now, that success may be coming at the expense of the format the company owes its entire existence to: music.

Spotify’s latest audiobook data

Without Spotify, royalties for independent authors would have increased to 23% from the first quarter of 2023 to the first quarter of 2024, but with Spotify’s addition of audiobooks in Premium, independent authors have seen a 95% jump in their royalties.” That is what Spotify told the book publishing world in mid-April, in addition to claiming that 25% of Spotify Premium users in the US, UK, and Australia have engaged with audiobooks. 

According to the data that the company has released, new audiobook listeners are also spending 2.6 hours longer on Spotify in the two weeks after starting an audiobook. To top it all off, 57% of audiobook listeners on Spotify are between the ages of 18 and 34. Not only is this data encouraging for Spotify’s shareholders, but it also indicates to the book publishing industry that audiobooks will be a growing source of revenue for publishers and authors alike. But where is that revenue going to come from exactly?

Bundle Peter to pay Paul

While Spotify courts book publishers, the company finds itself ruffling the feathers of music publishers as the streaming service reworks the structure of its mechanical royalty payouts. Just a day after Spotify’s self-reported audiobook numbers hit the press, the National Music Publishers Association (NMPA), which represents independent and major publishing companies in the US, accused Spotify of attacking songwriters. This came after Spotify announced that the company would treat Premium subscriptions as bundles, thereby reducing the mechanical royalty rates being paid out to songwriters.

NMPA’s David Israelite went so far as to call Spotify’s bundling of audiobooks and music into the Premium subscription — and the resulting reduction of mechanical royalty payouts — “cynical” and “potentially unlawful.” Spotify’s reasoning is likely this: bundling multiple products gives consumers a discount relative to what they pay (or would pay) for standalone subscriptions to each product individually. Discounted subscription revenue from bundles must be split between multiple products, while standalone subscription revenue is not, meaning payouts for the former are lower than for the latter. As part of this bundling approach, Spotify will be rolling out a Basic tier, which is what users have long known as Spotify Premium: ad-free music plus free podcasts with ads. 

While it might seem like Spotify is taking revenue from one industry to pay to another industry – thus pitting book publishing and music publishing against one another – in reality, it may be more optics than anything. Had Spotify chosen to introduce a completely new plan with a completely new name rather than keeping the old name and introducing a bundling pricing strategy to the existing paid plan, it might have saved everyone a lot of confusion. That said, if bundling formats is the future of streaming services, then each industry is going to have to think hard about how they advocate for fairer slices from a smaller pie.

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