Why Audiobooks Are Music to Investors' Ears

  in Royalty Investing

Dec 13, 2016

headphones on open book

Be it music, movies, or books, one trend remains constant throughout—digital revenues are up while physical revenues continue to fall.

Just look at the book publishing world. While overall sales for the first half of the year are down 3.4%, audiobooks are the fastest-growing format in the book business.

According to the Audio Publishers Association, audiobook sales jumped 21% across the U.S. and Canada in 2015. As a result, digital revenue in the U.S. increased 38%, compared to physical book revenue growth of 8% for hardcovers and 3% for paperbacks.

While 2016 data is not yet complete, the same association reports that for the first half of the year, digital audiobooks grew by over 32% from the same timeframe last year. In June alone, that figure was over 50%.

Book publishers have responded by increasing their audiobook activities in both quality and quantity. On the quality side, production budgets have swelled, with producers hiring such A-List actors as Resse Witherspoon as narrators to increase audiobook’s appeal.

On the quantity side, there were over 35,000 audiobook titles released in 2015 across the U.S. and Canada, compered to just over 7,000 in 2011.

Smartphones are almost solely responsible for this growth. From a single device that people carry with them nearly everywhere, you can now search, download, and stream any audiobook on demand. What’s more, these devices are increasingly integrating into car audio systems.

It’s one of the reasons Amazon.com acquired audiobook subscription service Audible in 2008. Audible told the Wall Street Journal that “customers around the world are on track to listen to 2 billion hours of programming this year, double the 2014 figure.”

Audible, which saw its membership increase by 40% last year, is doing its part to increase audiobook consumption by innovating around the listener. Just this year, it introduced a feature that allows listeners to create audio clips to share on social media. Another feature allows users to gift audiobooks to friends through email or text message, simply containing a link.

And as impressive as all these growth figures are, it seems audiobooks have plenty of upside ahead of them. During a panel at a UK book publishing conference discussing the future of audiobooks, Audible’s Lawrence Howell said the format still had “a long way to go,” noting that demand still outstrips supply in the audiobook category. 

It's a very exciting industry, and one anyone interested in royalty investing should watch closely, as the dynamics are very similar to investing in music royalties. This week, we are featuring our first listing for audiobook royalties with a pair of books that saw a 75% increase in payments from 2014 to 2015 (and 2016 earnings through three quarters already outpacing that of 2015).

The common thread between digital audiobooks and digital music is, well... digital. Digital distribution, while certainly a disruptive force in both industries, has resulted in greater convenience, lower prices, and increased engagement. And as we're seeing with audiobooks, embracing the format ultimately benefits the industry affected by it more than fighting the inevitable ever will.