I don’t get the digital audiobook industry

These days I get through more books in audiobook format than I do in printed format. I still relish the ability to find a secluded nook and curl up with an iced tea and a novel. The reality, however, is that my time has become a little too valuable to justify the single-threadedness of reading a printed book. I can also get through a book in 15-minute chunks while driving around, or in 90-minute chunks while jogging, or eating lunch, or whatever.

At that point, wouldn’t it almost be irresponsible of me to devote hours on end to printed fiction?

But here’s the thing: audiobooks are hella expensive. And I don’t really understand why.

The 600-pound gorilla in the audio industry is, of course, Audible. But there are other smaller players, such as Buzzy Multimedia. The kicker is that their prices are comparable—the smaller shops aren’t significantly cheaper than the gorillas.

That price is roughly $25-$50 per audiobook. Well, for the books I read, anyway. Let’s break that down:

One of the worst-case scenarios is Anathem, as it’s a bit more than 32 hours and is $50. The cost per hour of entertainment isn’t bad at $1.56. Pretty much no other form of entertainment is that cheap, I’ll grant you.

Stop and think about it from a distribution point of view. Let’s assume 96kbps MP3 audio, which is total overkill for an audiobook, but whatever. That 32.5 hours would net you a bit less than 1.4 GB. If you look at Amazon S3 bandwidth pricing you see a worst-case of $0.17 per GB, or a distribution cost of less than $0.25 for the entire audiobook.

I get that there needs to be markup for production costs and rights and royalties and whatnot … but I’m a little fuzzy on how you go from $0.25 to $50—literally two orders of magnitude.

I have to assume it’s a question of volume. Maybe they aren’t selling enough copies to make the production costs trivial. Let’s work that angle. But we’ll have to work it backwards.

Let’s say that it took 64 hours of reading by a voice actor to get the material to be edited down to the 32-hour audiobook. If we assume programmer-equivalent rates of $150 per hour, that’s just under $10k right there. Double that to $20k to cover editing and other production. Double it again to get a 50% gross margin so that it looks profitable on paper, to $40k.

Let’s say that after deducting infrastructure costs the margin that can be applied to recoup production costs on that $50 audiobook is something like $40. That works out nice, because at that price they have to sell 500 copies to break even, and 1000 copies to make their revenue goal.

That’s 1000 copies. Total. Ever.

How does that jibe with the book industry in general? Loose numbers suggest that average non-promoted non-big-deal print books will sell roughly 4000 copies nationally on their first printing. It’s then easy to believe that the audiobook market might be a quarter of that.

That also somewhat explains why the CD audiobook section at my local bookstores is depressing—it’s all mainstream safe crap. It’s stuff that there’s almost no chance of losing money on, because the masses read Cussler and Grafton and their ilk. (And, by the way, what I see in those sections backs up the loose numbers from above: 2-3 copies of each audiobook.)

But … look deeper.

Digital audiobooks have almost zero recurring costs. The online storage cost per year per 1.4 GB audiobook would work out to about $2.50. You could sell a single copy per decade and still make money on that. My point is that once you get past the production cost hump, the rules stop being the same as the print book industry. There’s no storage space to worry about. There are no shipping fees for returned copies. There are no second-run costs. Why, then, is the model so close to the print industry? It’s rare to find an audiobook publisher with one price for a shipment of CDs and another price for MP3 downloads.

I find these conservative estimates a little too hard to believe.

Most entertainment markets these days have a roughly $20 sweet spot. The consumer won’t think too much about dropping up to $20, but after that point there is a bit of hesitation and internal discussion concerning value. Could audiobooks be priced to where even the worst-case books like Anathem were $19.95? If we stick with our infrastructure cost of $10 (which is bogus and overvalued but whatever), that’s another $10 to recover the $40k needed to make the margin goals, or 4000 copies.

Am I really that much in denial? Is a total of 4000 sales an unattainable number for an audiobook? It’s possible, I guess. That would depress me. I want to believe that more people than that listen to audiobooks. Especially given how prevalent MP3 players have become.

I really, really don’t get the audiobook industry.

By Rick Osborne

I am a web geek who has been doing this sort of thing entirely too long. I rant, I muse, I whine. That is, I am not at all atypical for my breed.