Newsletter 26th of May: Who Benefits When Audio Market Leaders Join Forces?

NYHETSBREV

26 May 2021

Last week Storytel and Spotify announced that they will enter a partnership, making audiobooks available to Storytel subscribers via Spotify’s Open Access Platform. This is all good news for consumers that subscribe to both services, as they will now get easier access. But who is the real winner in this deal when it comes to the actors – the content or platform provider?

Both Storytel and Spotify are leading in their respective segment of the audio market. Spotify has dominated the music streaming market since the beginning and has almost 160 million subscribers across 178 markets. In Sweden, Mediavision concludes that 1.6 million subscribed to the premium service in Q1 2021. The Swedish music streaming market is mature and stagnating; just below half of all households have a music streaming subscription and penetration has been stable for the past two years.

The Swedish audiobook market, on the other hand, has grown substantially during the same period, i.e. since Q1 2019. But this market is now also showing signs of maturity. Penetration is almost 20% and growth has gone from double to single digit over the past year. Storytel is the leading actor, but on a significantly smaller segment of the audio market which, in this case, makes its position weaker than Spotify’s. Competition is fierce and there are other upcoming services like Nextory and Bookbeat.

Both Spotify and Storytel find themselves “trapped” on a maturing market, but with different challenges. Growth will need to be generated from other areas, which can be either new markets (as Storytel gaining access to new potential customers via Spotify) or new content offerings to fight churn (as Spotify gaining access to Storytel’s library). In that sense both actors appear to gain from the partnership. But is it really a win-win-situation in the long run?

To begin with, Mediavision analysis points at Spotify being almost five times the size of Storytel in subscribing households – and that is only on the Swedish market. In stock market value, the factor is 25 (Storytel is valued at approx. 15 bn SEK and Spotify at 45 bn USD). Spotify holds a dominant position on the audio market and craves content to feed consumers and increase stickiness. This is where Storytel comes into the picture. The question for Storytel is what the long-term value of this partnership is. It will gain access to new potential customers at the risk of making Spotify even stronger in building customer relations. E.g who would the consumer turn to if they had to choose between Spotify and Storytel? Well, the figures give us some guidance: in Sweden, more than 50% of Storytel’s customer base overlap with Spotify. In addition, share-of-listening is 10 times higher for Spotify than for Storytel. When the partnership was announced Storytel’s stock price jumped +20% in just one day. The Spotify stock price barely moved. The market seems to think that Storytel is to gain the most from this partnership. Time will tell.

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