Spotify disclosed that it paid about $119 million in cash for audiobook distributor Findaway when the deal closed last month — representing its entry into the category dominated today by Amazon’s Audible.
The company paid €117 million ($118.8 million) in cash for Findaway, Spotify revealed in an SEC filing Wednesday, after reporting better-than-expected Q2 results. Of that amount, 71% (€83 million) was accounted for as goodwill, which is the estimated value of an asset based on the established reputation of a business.
In addition, Spotify agreed to additional cash payments of €13 million ($13.2 million), which are contingent on the continued employment of certain Findaway employees. Spotify also incurred about $5 million in acquisition-related costs for the purchase. The audio streamer first announced Findaway deal in November 2021.
“We believe that audiobooks, in their many different forms, will be a massive opportunity,” Spotify CEO Daniel Ek said at the company’s 2022 investor day last month. “And, with one major player dominating the space” — referring to Audible — “we believe we will expand the market and create value for users and creators alike.”
Long term, according to Ek, Spotify expects audiobooks to have gross margins above 40% — higher than its 30%-35% gross margin target for music — and be “highly accretive to the business.”
Spotify had previously disclosed that it paid €83 million in cash combined to buy podcast analytics firms Podsights and Chartable, deals it announced in February.
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 at the June investor day presentation.
Findaway remains based in Solon, Ohio, and continues to be led by Findaway founder and CEO Mitch Kroll, who reports to Zicherman.
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.