New audiobook pricing gives Spotify the best of both worlds

In late 2023, Spotify slowly started rolling out audiobooks to Premium subscribers in select markets. In contrast with Spotify’s unlimited supply of music, Premium subscribers were allotted 15 hours (roughly two audiobook equivalents, according to Spotify) of audiobook listening per month. Once a user hit that limit, they could buy a 10-hour top-up for $12.99.

Now users have another option: the Audiobooks Access Tier. For $9.99 (as opposed to the Premium price point of $10.99), users can access the same 15 hours of audiobook listening (and even more expensive 10-hour top-up block opportunities) while foregoing access to unlimited ad-free music streaming. According to Spotify, the platform has seen a “45% increase in free users searching for and interacting with audiobook content each day”, suggesting Spotify’s strategy is to convert free users to paid subscribers and its priorities lie in subscriber addition and retention, no matter the audio format.

Spotify’s simple economics

As it stands, Spotify’s audiobook pricing is following the simple law of supply and demand, at least relative to its music streaming and podcast pricing. Listening to four audiobooks on Spotify in one month costs almost $50, or roughly $12 a book. Listening to 40 audiobooks on Spotify in one month costs many magnitudes more. Meanwhile, listening to 400 tracks on Spotify costs $10.99, which is the same price for listening to 4,000 or 40,000 tracks. Where music streaming is characterised by infinite supply, audiobooks, at least for now, retain scarcity, which increases per-unit value. As such, listening to audiobooks is much more expensive than listening to music on Spotify.

While audiobook supply may be limited now — only 200,000 audiobooks (in comparison to 100 million tracks) are available on Spotify — it may not stay that way for long. By bundling music, podcasts, and audiobooks into one Premium subscription, Spotify is making clear its priority to develop an audio-first, format-agnostic search engine that increases user volume and engagement over time. What YouTube did with free video, Spotify is trying to do with paid audio, and that raises some major questions for Spotify’s user conversion prospects.

How Spotify’s tiers convert

The advertising revenue Spotify gets from free users is minor compared to the subscription revenue generated by Premium users. As such, one of Spotify’s priorities is to convert these free music users into some type of paid user. If a free user in an established streaming market like the US or UK has not yet paid to stream music, they probably are not going to. In fact, MIDiA’s Q1 2022 consumer survey found that only 21% of consumers who do not subscribe to music streaming say they would be willing to pay, and the most common reason for not paying was that they simply do not listen to enough music to justify a subscription. However, Spotify is likely thinking that those free users may pay for some other kind of audio content that has not lost virtually all of its per-unit value. Enter audiobooks. 

But there is another type of user that Spotify is trying to convert: users who are not yet on the Spotify app at all. Amazon’s Audible has long been the market leader in audiobooks, but if Spotify can lure users toward a more convenient audiobook experience, then the platform can increase its audiobook market share quickly. At $7.95 a month, Audible Plus may be cheaper than Spotify’s Audiobooks Access Tier, but it does not include free music listening or access to Audible’s complete library of audiobooks. At $14.95 a month, Audible Premium Plus is more expensive than Spotify’s audiobook-only and Premium plans, and it really only offers one title from Audible’s extended library of audiobooks.

For a lot of users, having more audio format options at a lower price will be enough to drive conversions from Audible to Spotify. As such, Spotify pricing its audiobook-only tier just $1 lower than its everything tier and right in the middle of both of Audible’s audiobooks plans is no accident. Rather it is Spotify’s strategic play to convert users from within Spotify and across platforms.