Listening to Audible

Unlike just about every other content publisher online, spoken word audio seller did not come to the fee-based model late in the game. Founded in 1995, the company knew from the start that users would have to pay to play, and so from the day it opened its Web doors in 1997, it has been charging for downloadable audio. While profits remain elusive, the Wayne, New Jersey company has been ahead of the curve when it comes to selling content online, and much of its current model anticipates trends in online fee-based content. Audible is worth a listen.

The company's core products are audio books from the major books-on-tape publishers and 155 different publishing sources. In the online world, aggregation is critical, because, as Audible discovered, "people don't shop by publisher, but by author," says Jonathan Korzen, director of communications. They also shop by brand: The fastest growing segment of Audible's inventory is a line of 25 subscription products, spoken versions of periodicals such as Wall Street Journal and New York Times, archives of key NPR programming such as "All Things Considered" and "This American Life," and its own Web show "RobinWilliams@Audible." By mid-2002, Audible had sold to over 143,000 consumers, and about 80% of its revenue was coming from recurring memberships and subscription fees.

Get it Off the Web
Audible has been prescient in understanding the inherent limitations of the Internet as a medium for consuming content, and so it has worked mightily to get users to take their audio off the Web, pronto. Let's face it, the PC screen is the least comfortable content delivery device ever invented and no one wants to be tied to their desk to hear audio books. Audible discovered long ago that members with portable digital players are in fact good customers who buy lots of audio books. This is one reason the company not only sells its own audio player, but also gives one away as an incentive to buy memberships.

In fact, some of Audible's recent partnerships and format innovations also point to a future in which the Internet may become less of a platform in and of itself than a hub where users manage and route content that they actually consume offline. In addition to digital audio players, the company is targeting CD players by making their wares "burnable" to CD-R media.

The company's recent deal with libraries is a fascinating example of creative distribution using the Web as a hub. The company sells libraries access to its audio books as well as portable players. Instead of lending books-on-tape, 50 partner libraries put the requested audio book on one of these players and lend those to its patrons. It gives libraries immediate access to a much larger selection of audio books than it could afford to buy, and these recordings take up much less shelf space and are not prone to melting on people's dashboards. For Audible, it is a novel way to get into the most lucrative content market--institutional and bulk sales.

Audible is also working with AT&T Wireless on experiments in downloading audio directly to upcoming Pocket PCs with wireless connections. Via the faster cell phone network (2.5G), audio books and serials can be pushed to portable devices automatically overnight, for instance, to bypass the Web altogether. In fact, Korzen says, "wireless might pre-empt this premise that the Internet is an integral delivery channel." Even satellite radio is looking at Audible, and the company is looking back, because its niche material seems perfect for subscription-based in-car audio.

Kiss Subscribers
We have heard it said by many would-be content sellers that the Web is great for experimenting with multiple subscription offers and flexible fee models. Actually, Audible would assert that just the opposite is true: the Web demands a "Keep It Simple, Stupid" approach to subscription sales. The company used to sell its wares à la carte only, and you can still buy from them a title at a time. But in 2000, Audible started offering audio book "memberships," multiple downloads for a recurring monthly fee. It also offered "subscriptions" to the individual spoken word periodicals and shows. At first, the company offered multiple plans, including an all-you-can-eat format. But it turns out that consumers do not always want massive choice. "We had too many offers out there," says Brian Fielding, executive VP, content and legal affairs. "They go blind reading all those offers," and it prevents many people from making a choice.

By monitoring the flow charts closely and seeing which plans attracted the most customers, Audible now has streamlined the process to two plans, the BasicListener ($12.95/month for a book a month and one subscription) and PremiumListener ($15.95 for two books a month). "Make the marketing message as easy and simple as possible," says Fielding.

But with digital portability, simplicity itself may be the most complicated task. Audible has had to contend with this considerable challenge because its sales process involves the relatively newfangled art of downloading copy-protected tracks to the desktop for use on a remote player. This is nothing like buying a book at Borders. "When we first opened, you had to do almost 28 discrete processes to get your damned audio download to your desktop," says Fielding. "Now the number is between six and eight, but it has taken us five years to get it down. And that's not because we're stupid." Indeed, the site is a model of elegant selling. By using icons with pop-up descriptors, Audible squeezes a tremendous amount of product info and buy options into just a few inches of screen space.

Slow and Steady
While many dotcoms continue to think that offline promotion is key to building a Web brand, Audible found that unless a company has the funds to sustain radio or print campaigns, "there is a blip when the ad runs and then there is a fall-off," says Fielding. The Web itself remains the strongest, cheapest means of acquiring new customers. In negotiating co-marketing agreements with media partners, Audible is more interested in getting its hands on their email lists than getting print space or air time because that platform has become one of its most powerful promotional vehicles. Whenever someone buys or samples a single title at Audible, it sets into motion a sophisticated, phased email campaign that is customized to the kind of first-encounter the user had with the site.

In addition to a very successful deal with, which links to Audible whenever an audio version of a book is available, the company has an interesting co-marketing deal with that may also set the model for future fee-based content. New Salon Premium subscribers get six free audio books from Audible, while new Audible members get a two-month sub to Salon's fee-based content. This sharing of like-minded audiences across fee-based sites is almost certainly going to become necessary.

It is not surprising that Audible is also eying another nascent model--having broadband ISPs pay to offer its content as part of high-speed access. As ISPs such as MSN, AOL, and Comcast compete for customers, they may look to adopt the cable TV model, offering exclusive content bundles as incentives. "The notion of bundling the Audible service with a major broadband provider is brain-dead easy to think about," says Fielding. Others, like women's content publisher iVillage, are also pursuing this model of making the ISPs rather than users pay up for content.

Not There Yet
Slow and steady may be enough for Audible to win this race, since its revenues and customer base have continued to rise for twelve straight quarters. Revenues were up 17% and customer up 16% in the first quarter. Nevertheless, Fielding admits, "It has taken longer to go profitable than we thought." He sees slow broadband growth and sluggish ecommerce acceptance as major reasons the company is still several quarters away from going in the black. And Audible will have to outrun its burn rate: $2.3 million in Q1, leaving $8.5 million in the war chest.

Even if Audible doesn't make the cut, though we guess it probably will, it won't be for lack of effort and foresight. Many of the marketing, merchandising, and distribution techniques with which it is experimenting are almost certainly a part of the Web's future if the medium has any hope of making users pay to play.