Listen to the future

On any normal working day 97 million Americans commute to work by car alone. Overall, they spend 550 million hours every week sitting going nowhere in jams. Whether moving or not, they typically spend this time listening to the radio.

Audible.com is built on the hunch that at least some of those commuters value that 'dead time' enough to pay for premium audio content instead of defaulting to AM or FM listening. As Audible.com CEO Don Katz says: "Audible was formed to let people program their own drive time via the Web. We would create value in those dead times during the day when you can't read."

Recent milestones prove the business idea was less of a hunch and more of a vision. Last year its membership jumped by 100,000 in just nine months, media conglomerate Bertelsmann and the investment firm Apax Partners invested $6 million and the site was named 'best consumer web service' by CNet.com. The second quarter of this year saw its revenue from content and services increase by 86% over the same quarter of 2003. That quarter saw its membership jump by nearly 25,000. Not only has it formed a strategic partnership with iTunes, it is Amazon's audio download partner. To round off a stunning couple of years it was re-listed on Nasdaq in July.

Many dot.com slump survivors now listed on the Nasdaq have weathered difficult years and Audible is no exception. When Audible.com went live in 1997 CEO Don Katz admits the service was 'primitive'. Users had to fork out more than $200 for an Audible MobilePlayer which carried just two hours of audio listening. The company admits the playback sounded like an ansaphone. In 1998 the company exchanged MP3 players for year-long payment commitments. Despite these drawbacks Audible.com attracted 50,000 members by 2000. Audible.com members could download books for around 10 per cent of the price they’d pay for the same tape or CD.

The team behind the launch assumed that electronics companies would develop their own digital audio players, forcing the price down as they replaced CDs and tapes. Instead, sales of digital audio players flat-lined from 1998 until the iPod was launched.

As the technology caught up with the market Audible's membership steadily rose. It doubled its membership in less than a year to 100,000 in 2001. By January 2003 it had doubled again and before the year ended the figure was 300,000. Now MP3 players come 'AudibleReady' and the whole service has transformed.

A busy commuter who is a subscriber to Audible.com's New York Times service can now get out of bed, unplug her MP3 player from her PC in the morning, jump in the car and listen to the package on her way to work. Audible.com sends audible versions of the New York Times and the Wall Street Journal to subscribers in the middle of the night. If compatible MP3 players are used, the content downloads straight to the MP3 automatically. One device that does this is Creative Lab's MuVo.

Users can subscribe to many other subscription deals such as Forbes, Harvard Business Review and Scientific American. Many assume the audible versions of these publications are produced by the titles themselves. In fact, it is Audible that produces this content using a roster of professional DJs and voice-over actors. Audible.com told us that they use a 'graveyard shift' who receive the New York Times and the Wall Street Journal in the middle of the night and prepare the audio version for distribution. Most of these publications provide a link to the Audible site for users interested in the audible versions. The subscription price for the New York Times and Wall Street Journal is just $69.95 for five digests each week for a year.

While there is obvious value in providing audible versions of popular periodicals, some have been less convinced about the value in offering radio programmes. In the 1990s Mr Katz had to convince potential investors that people would value the ability to 'time shift' good radio shows.

Audible.com's director of public affairs, Jonathan Korzen, told us: "The argument that people won't pay for radio because it is already free misses the context of the customization, the delivery, the convenience and the power we give the listener to control when and how they listen. We also give people the power to put books, radio shows, newspapers and magazines onto one little device."

While audible books are the company's biggest seller, Mr Korzen did tell us that subscription sales of audio periodicals are growing faster than their book sales. "I think this means that people discover audible.com for audiobooks and as they get comfortable with the service then they try, and enjoy, the subscription products." He says the company would like to offer more journalism content.

In total the company offers 50,000 hours of audio content from 185 content partners. Remarkably, only one in every two Audible.com customers have ever tried an audio book before, suggesting that digital audio content has the potential to reach a much wider market than books on CD or tape.

So, given the growth in demand for digital audio content and the clear demand for audio content, why are there so few sites offering a similar service? "Part of the answer is that we were the first," says Mr Korzen. "Publishers could use us as a vehicle for a new delivery channel. We demonstrated that we were not eroding their content. We built a customer base and I think our partners feel comfortable." He says that no direct competitors have emerged although mediabay.com and audiofeast.com offer similar services but with completely different content choices.

While iPods have become a household name, Audible.com's CEO concedes that audio players generally have a relatively small household penetration. However, he argues that the cost of the technology has now fallen low enough for a true mass market to emerge. Mr Korzen told us: "What we think has been holding back growth has been the only recent emergence of 'life changing' devices such as the iPod and similar devices as affordable, obtainable and easily understandable in terms of their value."

This month Apple alone said it sold two million iPods in the three months up to September compared with 860,000 in the previous quarter. If Audible.com has its way, they won't just be used for music.

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See also:
Audible.com: http://www.audible.com

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