Listen up: Storytel has created a mass market in Sweden for audiobooks that is, in terms of money spent per capita, the largest in the world. Now the company is targeting the rest of Europe.
The numbers Storytel generates have changed the Swedish audio market profoundly. The service has around 175,000 subscribers who pay 169 SEK (£14.45) per month. Last year these customers accounted for more than four million listening sessions. It has a de facto monopoly on the Swedish market, with its competitors lagging far behind.
A bestseller on Storytel typically attracts 10,000 listeners, which means production costs are covered within one to two months of publication, but some can reach 20,000 to 30,000 listeners. Publishers now produce more than three times as many audiobooks as they did three years ago. The audiobook boom has also started to affect which titles Swedish publishers buy; it is becoming more common to buy a title on the basis of its potential in the audio market alone, which was never previously the case.
The rapid growth of Storytel—it has doubled its subscriber numbers and revenue every year since 2010— has been played out more or less in secret. Just a handful of publishers, among them the country’s largest, Bonnierförlagen, saw what was happening, and now other publishers are having to catch up.
The reason for this is that Storytel was always an outsider in the Swedish book trade. Jonas Tellander, the company’s chief executive, was working as a chemical engineer in Basel, Switzerland, when he founded the company in 2005 with developer Jon Hauksson (from Iceland). The duo never went to the book trade for investment and they don’t consider themselves a bookish kind of company. To investors, Storytel is a tech company.
Under the radar
Being situated in Switzerland meant Storytel’s financial growth was all but invisible to Swedish publishers, so it was up to Tellander to make a stir. He tried, but no one listened—or they didn’t listen hard enough. When the financial crisis hit in 2008 and the company’s initial investment ran out, Tellander took part in the Swedish equivalent of “Dragons’ Den”. He succeeded in getting one of the dragons to invest in Storytel: the business later acquired Swedish publisher Massolit and relocated to Sweden.
But the main reason so few saw what was happening was that between 2010 and 2013 Storytel didn’t advertise. It wasn’t visible to competitors, analysts or the media. As Tellander says: “We have had a customer satisfaction rate of 95% over the past four years, so we relied very strongly on people recommending the service to their friends. We didn’t have a marketing budget. But in 2013 we realised that there was a substantial possibility that a serious competitor would emerge. So in 2014 we invested in what was for us a gigantic marketing budget—gigantic in as much as it was half our 2013 turnover, roughly 20m SEK (£1.7m). Today it is almost twice as large.” The sum means Storytel has been the leading outdoor advertiser in Sweden in the last two years, unheard of in books. In 2012 the founders also took another key decision: Storytel bought two small audiobook publishers and started to produce its own audiobooks. Storytel and Bonnierförlagen are now by far the leading audiobook publishers in Sweden, and this has become an essential part of Storytel’s overall strategy, even when approaching a new market. Tellander says: “I guess our claim to fame internationally is that we are able to develop a market that does not exist to begin with. Quite simply, we created the audiobook market in Sweden from scratch.”
Storytel's Jonas Tellander.
Tellander says that Storytel would not have succeeded were it not for the success of another Swedish venture. “We are three years older than Spotify, but its success has made consumers accustomed to this kind of business,” he says. “That, and the big impact of the iPhone, was paramount for us. It all took off when we built an app for iPhone and Android and when we were able to create an offline mode in the app. It’s also key that people have grown used to paying by credit card online and downloading apps. Paying for content has also grown. Everything we dreamed of when we started this, really, has materialised.”
Audiobooks make up roughly 95% of its business, with the rest coming from e-book sales. But e-books are not big in the markets in which Storytel operates: in Sweden, e-books account for no more than a few per cent of total sales, and Swedish publishers are wary of releasing newer e-book titles to a subscription service.
The Swedish publishers who saw what was about to happen in audio early on, and who increased their audiobook production at the beginning of 2014, have seen huge growth. Today 10%–15% of their turnover is from audio sales, most of it in digital format.
Storytel sees itself as an international player even if only 20% of the revenue comes from its international ventures. A couple of years ago the company entered Denmark and the Netherlands. Last year it began operating in Norway. In February this year it launched in Poland and in mid-April, the operation entered Finland. “We can wait a long time to find the right partner,” says Tellander. Preferably it’s an audiobook publisher the business can purchase but sometimes it’s about finding a dedicated person.
Tellander adds: “All new countries require a long-term, strategic approach. It took us a couple of years to find the right person in Poland. We have come a long way in Sweden: if you look at sales per capita it’s the highest in the world when it comes to audiobooks at about 40 SEK (£3.42) per capita. In the US, it is half that sum.”
Some UK publishers expect Storytel to reach these shores, but Tellander is cautious—English-language audiobooks are already an important part of Storytel’s catalogue. Tellander says: “English content is becoming increasingly interesting to us as we establish ourselves in more countries. We have a representative in London buying up titles and I believe we will have a strong catalogue pretty soon. But to sell those titles in the UK and US will require new discussions.”
He adds: “We are looking at all possible markets to see if we can contribute something. But with Audible [already] in the UK market, it is unclear whether we can contribute positively to developing the market. It would require quite a lot [of resources] and the question is whether it is possible to compete in a reasonable manner. But it is up to the publishers if they want to have a streaming service and a subscription model that risks cannibalising the sales they already have through Audible. Some [companies] have tried in the US but haven’t succeeded.
“Audible has a subscription service in Japan and I think it is looking to introduce it in several other countries. Amazon, which owns Audible, is extremely successful in the English-speaking world. The question is, is that what we should put our energy into, or should we try to tackle some other markets?”