Apple (AAPL) Is Late to the Game on This Tech Resurgence. Here Are the Real Winners.

Jan 22, 2023

Netflix (NFLX) might’ve surprised Wall Street with the impressive subscriber boost it reported on Thursday, but one earnings beat can’t change the fact that growth in the video streaming industry is tempering.

In its place, another streaming segment is just getting started…

Audiobooks are experiencing a remarkable resurgence to kick off 2023, and tech giants are clamoring to claim their piece of the profits.

In 2021, global audiobook sales rose 25% to $1.6 billion, marking the tenth-straight year of double-digit percentage growth.

And from here, the audiobook market should continue to grow at an impressive clip to reach $35 billion by 2030 (an estimated 26% CAGR).

LikeFolio’s proprietary social media analytics tipped us off to this trend forming early on…

Mentions of downloading, buying, or reading an audiobook have increased in each of the last five quarters.

By end of next month, social media audiobook mentions are projected to jump 51% over an 18-month period — a pace that will well surpass Spring 2020 lockdown levels.

Three big names have thrown their hat in the audiobooks ring with varying degrees of success.

Today, we’ll take a look at which stocks are winning — and which are struggling to keep up.

Winners and Losers in the Audiobooks Market

Producing an audiobook with a human voice can take weeks and cost publishers thousands of dollars, so Apple (AAPL) thought it would take a creative angle with a new catalog of audiobooks narrated by artificial intelligence (AI).

Shakespeare meets ChatGPT, if you will.

The idea was that AI will cut costs and give Apple an edge.

But the strategy has received mixed reviews.

A chief concern is that it threatens to put professional voice actors out of work. It also revived conversations related to Apple’s app store policies that its peers allege are anti-competitive.

This was a desperate attempt from Apple to shake up a rapidly growing audiobook market.
The question is…

If Apple already has its iPhone in the palms of more than 120 million Americans, why is it now struggling to gain a foothold in this lucrative media category?

Simple.

Because Amazon (AMZN) and Spotify (SPOT) got a head start.

Amazon’s ‘Audible’ has been winning over audiobook fans in a big way.

Over the past 90 days, Audible mentions are exceeding all audiobook services in our coverage.
Consumers like the platform’s growing selection of audiobooks and podcasts. Originals like “The Decision: Overcoming Today’s BS for Tomorrow’s Success” written and narrated by Kevin Hart are big differentiators.

Between the two of them, Amazon and Spotify’s platforms make up 90% of audiobook demand mentions combined.

But while Audible has long been the market leader, Spotify Audiobooks is emerging as a formidable challenger thanks to a key advantage.…

Spotify’s Bid for Audiobook Domination

Unlike Apple, Spotify is showing that getting a late start in the audiobook market doesn’t close the book on success.

The company has already amassed a large portion of audiobook consumption mentions, and its product is still very new.

Last September, Spotify announced a plan to bring over 300K audiobook titles to U.S. customers.

One company executive called audiobooks a “substantial untapped market,” noting that the audiobook segment is growing around 20% annually but makes up just 6% to 7% of the overall book market.

Since then, buzz around Spotify Audiobooks has exploded.

Just in time for the holiday shopping season, mentions skyrocketed +417% quarter-over-quarter (QoQ) in the Sept. 1 to Dec. 1 period. Even after leveling off in recent weeks, mentions are still up 287% from the previous year.

Spotify is looking to duplicate its success with podcasts in audiobooks and based on the early consumer response, it’s well on its way.

Consumers love how well-organized and convenient Spotify’s Audiobooks library is. It allows you to bookmark the place you leave off, control your listening speed, and download additional offline line audio content.

One user wondered how he’ll switch from Amazon Audible…

Spotify Audiobooks is also getting high marks for its ability to set the stage. Even with action-packed drama books, where it can be a challenge to make the listener feel engaged, Spotify seems to be nailing it…

Of course, price matters too.

In contrast to Audible’s $7.95 monthly fee (or $22.95 Premium Plus fee), Spotify Audiobook charges by the book. Prices range from $3 for shorter works like children’s books to around $40 for megahits like Game of Thrones.

But once you buy it, you own it.

Unlike Audible, where you’re paying for unlimited access that lasts as long as your subscription, the Spotify a la carte model seems to be attracting customers.

For visually impaired folks that can have a hard time finding affordable audiobooks, for example, that price becomes especially important:

Spotify’s Ace in the Hole

But where Spotify has an instant edge over Amazon is in its selection. Audible has a little over 200,000 titles, shy of Spotify Audiobooks’ initial 300,000-plus drop.

From science fiction and fantasy to mystery and romance, consumers are falling in love with Spotify’s extensive assortment:

Whether Audiobooks can help revive Spotify’s stock, which is down more than -70% from its 2021 peak, remains to be seen.

But if Audiobooks can amass a large customer base to complement its music business, it will be tougher for digital advertisers to ignore once the ad spending environment improves.

At the end of January, we’ll get a first glimpse of management’s take on Audiobook traction when Spotify reports Q4 earnings.

While the business may be too small to move the needle just yet, Spotify’s entry into this high-growth market looks promising.

The company plans to launch Audiobooks in new markets, including the U.K., Ireland, and Australia, and introduce new features along the way.

And in the meantime, Apple (AAPL) has some serious catching up to do…