Spotify announced that it has closed the deal to buy audiobook distributor Findaway, touting the potential to expand beyond music and podcasts into the “substantial market opportunity” for audiobooks.
The audio streamer has not disclosed the financial terms of the Findaway deal, announced in November. Originally, Spotify had expected the acquisition, which was pending regulatory clearances, to close in the fourth quarter of 2021.
In the audiobook space, “just as we’ve done in podcasting, expect us to play to win,” Spotify CEO Daniel Ek said last week at the company’s 2022 investor day. “And, with one major player dominating the space” — a reference to Amazon’s Audible — “we believe we will expand the market, and create value for users and creators alike.”
Findaway first started out in 2005 with Playaway, a pre-loaded MP3 audiobook player. Today, the company says it distributes more than 325,000 audiobook titles from publishers worldwide. The company operates AudioEngine, a business-to-business audiobooks marketplace, and self-publishing platform Findaway Voices.
According to Spotify, Findaway’s technology gives the company access to the growing audiobooks market — which Spotify execs said is expected to grow from $3.3 billion today to $15 billion by 2027. “We believe this presents a unique opportunity to introduce music and podcast listeners around the world to audiobooks and drastically expand that market,” Spotify global head of audiobooks Nir Zicherman said last week at the investor day presentation.
Post-acquisition, Findaway will maintain its headquarters in Solon, Ohio, and will continue to be led by Findaway founder and CEO Mitch Kroll, who will report to Zicherman.
Long term, Ek said Spotify expects audiobooks to have “healthy margins, above 40% and be highly accretive to the business.” Spotify also anticipates that podcasts can achieve potential gross margins of 40%-50% within the next five years — higher than its 30%-35% gross margin target for music — although in 2021, Spotify’s podcast business had a negative gross margin of -57%, according to CFO Paul Vogel.