In late 2023, Spotify slowly began rolling out audiobooks to Premium subscribers in choose markets. In distinction with Spotify’s limitless provide of music, Premium subscribers have been allotted 15 hours (roughly two audiobook equivalents, in response to Spotify) of audiobook listening per thirty days. As soon as a person hit that restrict, they may purchase a 10-hour top-up for $12.99.

Now customers have another choice: the Audiobooks Entry Tier. For $9.99 (versus the Premium worth level of $10.99), customers can entry the identical 15 hours of audiobook listening (and much more costly 10-hour top-up block alternatives) whereas foregoing entry to limitless ad-free music streaming. In accordance with Spotify, the platform has seen a “45% enhance in free customers trying to find and interacting with audiobook content material every day”, suggesting Spotify’s technique is to transform free customers to paid subscribers and its priorities lie in subscriber addition and retention, irrespective of the audio format.

Spotify’s easy economics

Because it stands, Spotify’s audiobook pricing is following the straightforward regulation of provide and demand, a minimum of relative to its music streaming and podcast pricing. Listening to 4 audiobooks on Spotify in a single month prices nearly $50, or roughly $12 a e-book. Listening to 40 audiobooks on Spotify in a single month prices many magnitudes extra. In the meantime, listening to 400 tracks on Spotify prices $10.99, which is identical worth for listening to 4,000 or 40,000 tracks. The place music streaming is characterised by infinite provide, audiobooks, a minimum of for now, retain shortage, which will increase per-unit worth. As such, listening to audiobooks is rather more costly than listening to music on Spotify.

Whereas audiobook provide could also be restricted now — solely 200,000 audiobooks (compared to 100 million tracks) can be found on Spotify — it might not keep that manner for lengthy. By bundling music, podcasts, and audiobooks into one Premium subscription, Spotify is making clear its precedence to develop an audio-first, format-agnostic search engine that will increase person quantity and engagement over time. What YouTube did with free video, Spotify is attempting to do with paid audio, and that raises some main questions for Spotify’s person conversion prospects.

How Spotify’s tiers convert

The promoting income Spotify will get from free customers is minor in comparison with the subscription income generated by Premium customers. As such, one among Spotify’s priorities is to transform these free music customers into some sort of paid person. If a free person in a longtime streaming market just like the US or UK has not but paid to stream music, they most likely aren’t going to. Actually, MIDiA’s Q1 2022 shopper survey discovered that solely 21% of customers who don’t subscribe to music streaming say they’d be keen to pay, and the most typical motive for not paying was that they merely don’t hearken to sufficient music to justify a subscription. Nevertheless, Spotify is probably going pondering that these free customers could pay for another type of audio content material that has not misplaced just about all of its per-unit worth. Enter audiobooks. 

However there may be one other sort of person that Spotify is attempting to transform: customers who aren’t but on the Spotify app in any respect. Amazon’s Audible has lengthy been the market chief in audiobooks, but when Spotify can lure customers towards a extra handy audiobook expertise, then the platform can enhance its audiobook market share shortly. At $7.95 a month, Audible Plus could also be cheaper than Spotify’s Audiobooks Entry Tier, however it doesn’t embody free music listening or entry to Audible’s full library of audiobooks. At $14.95 a month, Audible Premium Plus is costlier than Spotify’s audiobook-only and Premium plans, and it actually solely affords one title from Audible’s prolonged library of audiobooks.

For lots of customers, having extra audio format choices at a lower cost shall be sufficient to drive conversions from Audible to Spotify. As such, Spotify pricing its audiobook-only tier simply $1 decrease than its every thing tier and proper in the course of each of Audible’s audiobooks plans is not any accident. Quite it’s Spotify’s strategic play to transform customers from inside Spotify and throughout platforms.