What Audible’s new royalty model means for its audiobook battle with Spotify

In early July, Audible’s blog broke the news that the company was introducing a new royalty model for audiobooks. Previously, according to Bloomberg’s Ashley Carman, Audible would do a “buyout”, paying a publisher an upfront fee to have their book on the service rather than distributing royalties according to titles or hours listened. 

The new model does distribute royalties according to titles or hours listened, dividing the value of a member’s plan and any additional audiobook credits used “among the titles the member listened to over the course of the month”. Once multiplied by the contractual royalty rate, that adjusted royalty payment is then distributed to creators. 

Audible’s new royalty model is a response to Spotify’s encroachment into the audiobook space but it is also an early statement to the publishing world about how the company plans to account to publishers and authors. A statement that has likely been informed by observing recent changes to royalty distribution models by major music streaming platforms.

For almost 20 years now, Spotify has been distributing music royalties according to a pro rata model where streaming revenue is collected into a pool and then distributed out to music rights holders according to their proportion of total streams on the platform. While this is equitable insofar as whoever has the most streams gets paid the most, it also means that listeners are not necessarily directly supporting the artists they listen to.

In 2021, SoundCloud saw an opportunity to refine its own identity as a music streaming platform by offering a competitive alternative: the user-centric model. Under this royalty distribution system, streaming revenue is distributed among rights holders according to which artists users are actually listening to. Two years later, Deezer seized its own opportunity, introducing the artist-centric model, which sets thresholds for royalty distribution based on an artist’s monthly stats, paying rights holders half of the royalty rate if performance falls under those thresholds and double if it exceeds those thresholds. 

Following mounting pressure from industry, press, and its competitors — especially when it came to combatting bot streams and AI-generated tracks — Spotify responded with its own amendment to the pro rata model. Now rights holders for songs that fall under its performance threshold make nothing, and royalties are still distributed according to the pro rata model to rights holders for songs that fall above that threshold.

Unlike its music industry dealings, Spotify has been opaque about the way it distributes audiobook royalties. While much of that lack of clarity has to do with the private deals that larger publishers have negotiated with the platform, it has made many in the publishing world skeptical about how Spotify’s audiobook offering will ultimately affect smaller publishers and authors. Many of the bigger deals seem to be buyouts, similar to the way Audible was operating; however, Spotify also appears to be quietly pushing for a pro rata model among smaller publishers and independent authors. Those rights holders do not have to look much further than music streaming to understand how Spotify’s pro rata model has impacted smaller artists. 

The same example is there for Audible to study, and the company already appears to be learning from the moves that SoundCloud and Deezer made over the last few years. While Spotify’s pro rata model benefits large rights holders more than it benefits independent creators, SoundCloud’s user-centric model does the opposite. Audible's move, then, might be an appeal to independent publishers and authors rather than big publishers. Maybe Audible is gambling on a future that hinges more on independents than on conglomerates. 

This much is clear: By laying out a clear user-centric royalty distribution model for rights holders and creators before Spotify has been able to explicitly define its own approach, Audible is striking early in its battle for audiobook supremacy.