Don Katz first heard of Jeff Bezos in 1996, shortly after leaving journalism to start his audiobook subscription company, Audible Inc. One of Katz’s early investors was John Doerr of venture firm Kleiner Perkins Caufield & Byers. The firm was taken by the Japanese idea of keiretsu, a network of like-minded companies that support one another through partnerships and equity stakes. Audible and Amazon.com Inc. seemed like ideal candidates, Doerr told Katz when suggesting a team-up with Bezos: “He likes books, too.”
Katz flew to Seattle and met Bezos for coffee. Audible’s success, Katz acknowledged, would rely on an impending internet revolution, where both portable digital media players and the practice of downloading files over high-speed data networks became commonplace. Bezos told Katz he was focusing on selling physical books, because it’d be a quicker way to go mainstream. Audible, he predicted, was an idea that would take a decade to mature.
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The two men kept in touch. At various points, Bezos stepped up involvement in Audible, until Amazon bought the company outright in 2008, leaving Katz to run it as an independent subsidiary. By the time of the acquisition, Audible had created a market for book lovers doing the dishes or on a jog. “I began to think you could take all this time, which is dead time, and potentially make it reading time,” Katz says.
As Amazon has in the years since, Audible first built the infrastructure for a novel form of media consumption, then slowly trained customers to adopt it. While the traditional media industry was apathetic or resistant, the company gradually increased the production of its own material. Audible has continued to bet heavily on this approach, starting a division late last year to produce original content on a much larger scale.
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Today, Amazon is the book industry’s bête noire, while Audible and its rivals represent a tiny bright spot for the beleaguered publishing industry. Audiobook sales totaled $2.1 billion in 2016, the most recent year for which data are available, according to the Audio Publishers Association. That’s about 18 percent higher from the previous year and two and a half times the market size when Amazon bought Audible.
Audible accounts for about 41 percent of all audiobooks sold, including digital and physical formats, according to researcher Codex Group LLC. Amazon also sells audiobooks directly through its website and, with Audible, accounts for more than half the market. Audible doesn’t disclose financial information, but says its annual subscriber growth is in double digits. Most customers pay $15 for a monthly subscription that comes with a single audiobook. (A la carte, they often cost more than $20.) The company’s library includes 400,000 titles.
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For years, the company operated without any real competition on the fringes of the $26 billion publishing industry. Google and Walmart Inc., though, have recently announced plans to sell audiobooks online. Publishers are growing more aggressive about retaining the rights to produce audio versions of their books, and the price of such rights is increasing quickly. “We don’t like to work with Audible. Working with Amazon is always a treacherous affair,” says Dennis Johnson, co-founder of Brooklyn-based Melville House Publishing. “We’re certainly concerned with their dominance in the marketplace.”
Katz says there’s been outcry at every technological innovation in media, from recorded music to the paperback book. He argues the creation of the digital audiobook industry benefited even his critics.
There was an audiobooks market, kind of, when Katz began working on Audible in the mid-1990s. They came as either huge boxes of cassettes or CDs, or in more accessible versions that were brutally abridged. Katz, who’d written three books by that time, was appalled by sloppily condensed audiobooks where narrators adopted the flattest affects possible. “They did things to books that, from a writer’s perspective, were unconscionable,” he says.
The idea for Audible occurred to him as he was hitting a wall with a book project about how technology was going to change culture. He found the ideas convincing but struggled to write about trends that hadn’t yet taken hold. He also worried that he’d peaked with Home Fires , a 1992 book tracking a single Long Island family from World War II to the early ’90s. He decided to turn his latest project into a startup instead.
Enlisting the help of a college roommate who was working in Silicon Valley, Katz developed a proposal for a company that would make digital audio players, then build a store of digital audiobooks to download onto them. He raised $3 million in funding, half from Doerr’s firm, and set up shop in a former dentist’s office in Montclair, N.J. It was slow work. By 1999, Audible had about 3,000 listeners.
Of course, in the Pets.com era, that seemed like enough of an audience to take the company public. It raised $38 million in an initial public offering in July 1999, and watched the price of its shares double on the first day of trading. But when the dot-com bubble collapsed the following year, Audible went down with it. In its wake, the late comedian Robin Williams, who’d accepted equity in Audible as payment for his work on a spoken-word comedy project, said Katz had paid him “in Confederate currency .” Nasdaq delisted Audible’s shares in 2003.
By then, Amazon had bought 5 percent of the company, and Apple Inc. provided an even bigger lifeline when it integrated Audible’s proprietary file format into early versions of the iPod. Thanks largely to the iPod, Audible’s revenue surged almost sevenfold from 2001 to 2006, Katz says.
It wasn’t enough. The company had lost money every year but one and lived in fear of a hypothetical well-financed competitor spending it into oblivion. In 2006, Katz began talking in earnest to Bezos about being acquired. At the time, Amazon was preparing its first major foray into digital media with the Kindle. In 2007 it bought Brilliance Audio, another audiobook publisher. In early 2008, Amazon agreed to buy Audible for about $300 million in cash. It was two years behind the timeline for maturity that Bezos had laid out when the two men first met.
Since the deal, Katz has built a prominent profile in Newark, N.J. He gives free Audible subscriptions to public school students, is turning an historic church into a 400-employee “technology center,” and enthusiastically endorses the city’s pitch to put Amazon’s second headquarters there. Amazon recently said Newark was one of 20 cities it’s considering as a location. Katz laughingly demurs when asked whether he’s called Bezos to plead the city’s case. “Everyone at Amazon knows my beliefs about Newark,” he says.
It’s sometimes unclear how close Audible wants Amazon to come. The parent company has provided relief from the public markets, capital, and access to its tech. Audible’s engineers got an early look at the Echo speaker to start planning their integration into Amazon’s voice-control platforms, and current and former Audible employees say the connection helped with recruitment. Yet Katz wants to ensure Audible is seen as its own entity with a separate culture. “Overplaying the Amazon part of our store tends to track away from reality,” he says.
In some cases, the company could stand to benefit from greater oversight. In an email to employees last November, Katz acknowledged complaints that the workplace was “less of a safe space for women than it has been intended to be.” Two senior executives resigned after an ensuing investigation, and the company says it will introduce new anti-harassment training, declining to comment further.
Audible is firmly entrenched as the king of its small hill. It’s the only recognizable audiobook brand, and because customers pay for monthly subscriptions rather than buy each book a la carte, they’re less prone to comparison shop. Audible customers, who range from subway riders to folks washing their dishes, spend an average of two hours a day with the app.
The company’s hand in the retail market is even greater than it first appears. For years, Audible and Apple had a deal where Audible would provide the actual files that Apple sells through iTunes, giving Audible a cut of every sale from its most significant competitor. The deal included an exclusivity clause preventing Apple from sourcing audiobooks from other companies, and Audible agreed not to provide its files to competing platforms. Last year the two companies ended the deal after European publishers complained it was anticompetitive .
Michele Cobb, executive director of the Audio Publishers Association , says this is likely to spur competition. “There are just a lot more players than there were three years ago,” she says. The most powerful rivals may be Google and Walmart, though neither company has yet mounted a serious challenge.
Competition to make audiobooks has ramped up in recent years, adding to Audible’s library. There were more than 50,000 audiobooks produced in 2016, according to the APA, more than twice the number two years earlier.
The appetite for new titles has pushed up the price of audiobook rights, according to publishers. “The cost of rights has exceeded the growth in the marketplace,” says Troy Juliar, chief content officer of Recorded Books, which publishes about 4,000 audiobooks a year. Literary agents are increasingly interested in retaining audio rights, and publishers often refuse to sign book deals without them.
If publishers frequently choose to work around Audible, the company has also looked to lessen its reliance on publishers. In 2016 it launched a podcast service. Last year it announced it was investing $5 million in theater productions that could be easily converted into a smartphone format.
David Blum, who spent most of the past decade running Amazon’s Kindle Singles operation, now runs Audible’s original publishing operation. Blum’s official charge is to increase the number of Audible projects that aren’t simply readings of the printed word. Margaret Atwood, author of The Handmaid’s Tale, recently worked with Audible to write and record a spoken-word coda to the novel, and comedian David Spade is developing an audio-only memoir. “We’re really trying to break the boundaries,” Blum says, “and go to writers and creators and artists to think outside the traditional boundaries of what is a book.”
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