The famous audio streaming subscription service Spotify (NYSE:SPOT) is offering a free trial of audiobooks to its paying subscribers, as a Wall Street Journal report highlighted. If the service gains popularity among listeners, it will help the company diversify its revenue by expanding its audiobook business. The expansion will position Spotify in direct competition with tech giant Amazon (NASDAQ:AMZN). However, it will not be easy for the company to challenge AMZN’s dominance in this audiobook segment.
Let’s delve deeper.
Spotify Is Eyeing the Audiobook Segment
According to the report, Spotify plans to gauge subscribers’ interest in audiobooks. The company is working on a pilot program with prominent publishers in the U.S., enabling its paid subscribers to listen to up to 20 hours of audiobooks a month free of cost.
Spotify is finding ways to expand its presence in the audiobook segment. In June 2022, it acquired Findaway World, a digital audiobook distribution platform, for €117 million. The company then stated that the move would accelerate its audiobook content offering. It launched its first iteration of the audiobook listening experience in select markets in 2022, providing access to more than 300,000 audiobooks.
If Spotify decides to expand its audiobook offerings further, it will face direct competition from Audible, the largest producer and retailer of audiobooks. It’s worth noting that Audible is a wholly-owned subsidiary of Amazon.
It remains to be seen whether Spotify is able to dent Audible’s market share. Meanwhile, let’s look at what the Street recommends for its stock.
Is Spotify a Good Buy Now?
Spotify stock has more than doubled year-to-date. Its ongoing investments in improving its platform and user experience have paid off by driving its monthly active users, revenues, and stock price. Further, the increase in pricing will support its top line and margins.
Given the momentum in its business, analysts maintain a bullish stance on SPOT stock. With 18 Buy and five Hold recommendations, Spotify stock has a Strong Buy consensus rating. Meanwhile, analysts’ average 12-month price target of $178.83 implies 11.7% upside potential from current levels.
Bottom Line
Spotify has significantly benefitted from its investments in adding podcasts and improving offerings, which have reaccelerated the growth of its monthly active users. Thus, expanding into the audiobook segment could further help drive its user base. However, the company would find it difficult to chip away at Audible’s market share.
