There are signs that a new major player is coming to the audiobook market: Spotify. Spotify has offered a selection of audiobooks on its subscription music service for the past couple of years, but it hasn’t drawn much attention to them. Yet Spotify has been recruiting for a head of audiobooks, whose job will be to “develop and execute the book strategy for Spotify.” A big move into audiobooks makes a lot of sense for Spotify, and it should be good for the audiobook market in general.

Spotify is, of course, a dominant force in the music business, with more than 130 million paying subscribers worldwide. It’s second only to YouTube in user base for music but also has stiff competition from Apple and Amazon. In some ways, though, Spotify is in a tight corner. All of its main competitors have other revenue streams that dwarf their revenues from music services, and all of the services offer products that are fundamentally similar to one another and risk becoming commodities. Spotify also pays the bulk of its revenues to record labels and music publishers as royalties.

As evidence of Spotify’s risky position, back in 2014, Apple was preparing to launch its Spotify competitor, Apple Music. It attempted to get the major record labels to agree to let it price the service at only $5 per month instead of $10 per month. The apparent strategic reason for this move was to force Apple’s competitors to match the $5 per month price point. Apple isn’t particularly dependent on revenue from its music service, nor are Google and Amazon, but Spotify is; a move to $5 per month could have been fatal to it.

Apple’s gambit didn’t succeed. But shortly afterward, Spotify started an aggressive campaign to diversify its business—not by introducing other lines of revenue, but by integrating other types of audio content into its service. Spotify CEO Daniel Ek has stated that he wants more than 20% of listening on the platform to be of nonmusical content.

Spotify’s first move in this direction was in podcasting. It has integrated podcast playing functionality into its apps, not only for listening but also for recommendations and inclusion in playlists. It has spent hundreds of millions of dollars acquiring podcast publishers and the rights to popular individual podcasts (such as The Joe Rogan Experience), and it has been gradually making some of its podcasts exclusive to Spotify subscribers (podcasts have traditionally been available freely to all on podcast apps).

The podcasting strategy has succeeded brilliantly so far. Spotify is now the only podcast app other than Apple Podcasts with double-digit market share. As one measure of this strategy’s success, Amazon just announced a foray into podcasting through its Amazon Music app that looks quite a lot like Spotify’s.

Audiobooks are the natural next step in Spotify’s expansion to other types of audio content. Audiobooks are among the fastest-growing segments of trade book publishing. Deloitte predicted late last year that the global market will grow by 25% to $3.5 billion by the end of this year; that’s about double the music market’s recent growth before the pandemic hit.

Publishers should welcome Spotify into the market for two reasons. One is that Spotify is the only major content platform that cross-pollinates music and audiobook listening; this should increase the overall market for audiobooks.

The other is that Spotify will inject more competition into the market. And therein lies Spotify’s challenge. Subscription audiobook services are more different from one another than streaming music services are. Whereas music services all offer unlimited on-demand access to more or less the same catalog (more than 50 million music tracks) at the same price, audiobook services vary on price, catalog, access, and other features. Audible’s $15 per month plan includes several exclusive titles as well as a full catalog, but it limits access to one new title per month for “premium” titles. Kobo’s $10 per month plan gives users access to one new title per month from a comprehensive catalog. Scribd offers unlimited access to a limited catalog of audiobooks (only three of the Big Five participate) bundled in with its $9 per month plan for e-books, magazines, and documents.

Spotify will undoubtedly want to continue to bundle audiobooks into its main $10 per month premium subscription plan, along with podcasts. But it will be challenging for the company to get licenses to some titles for that type of offering, particularly frontlist titles from major publishers. Spotify may have to choose either a bigger catalog of audiobooks with higher or more complex pricing or a smaller catalog bundled into its main plan.

It will be fascinating to see how Spotify approaches this market. It has already taken its job posting for head of audiobooks off its website, so there may be movement from Spotify in audiobooks soon.

Bill Rosenblatt is president of GiantSteps Media Technology Strategies and is a founding partner of Publishing Technology Partners.