Streaming service provider Spotify (NYSE:SPOT) is aiming to seize a larger share of the audiobook market by offering 15 hours of free audiobooks each month. Beginning October 3, Spotify’s premium-paying subscribers will be eligible for this offer, with the option to buy 10 additional listening hours for $10.99. The company has first rolled out this offer in the U.K. and Australia and will launch the same in the U.S. in the winter.
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As per reports, Spotify has partnered with the five largest publishing houses and independent writers, offering some of the bestseller books and making this offer more attractive. Under the new offer, roughly 150,000 titles will be available to subscribers. Spotify will pay the publishers based on the users’ listening time or the proportion of a book they finish, depending on individual contracts.
More About Spotify’s Foray into Audiobooks
The step is aimed at capturing the audiobook market, which is currently dominated by Amazon’s (NASDAQ:AMZN) Audible. Spotify already hosts a magnanimous collection of music and catalogs, along with offering limited audiobook content. In 2021, it acquired Findaway World, a digital audiobook distribution platform, for €117 million. Later in 2022, Spotify started offering around 300,000 audiobook titles from independent publishers on a pay-per-download basis.
Post-COVID-19 pandemic, Spotify has been struggling to make profits due to stiff competition and price-sensitive customers. Moreover, the heavy investment in the podcast segment has chipped away at its margins. With approximately 220 million paid subscribers spread across the globe, Spotify could find potentially new listeners with the offering. Also, the company could see some of the free subscribers moving up to premium-paying ones, thus boosting its income. In July, Spotify raised the premium subscription plans in the U.S. by $1 to $10.99 per month to increase sales.
Is SPOT a Good Stock to Buy?
Wall Street remains cautiously optimistic about Spotify’s stock trajectory. Recently, Monness analyst Brian White downgraded SPOT to a Hold rating from Buy. Ahead of Spotify’s Q3FY23 results scheduled for October 24, the five-star analyst revised his view on the stock.
White noted that SPOT stock has already gained 89% so far this year and could see a downfall going ahead. The heated competition and narrow margins could lead to the “darkest days of this downturn” for the stock and the streaming market in general.
Overall, SPOT stock has a Moderate Buy consensus rating based on 17 Buys and seven Hold ratings. The average Spotify price target of $179 implies 15.9% upside potential from current levels.
