From...

January 19, 1999
Web posted at: 6:25 p.m. EST (2325 GMT)

by Lessley Anderson

(IDG) -- Audiobooks are big business in the traditional publishing world: $1.6 billion a year, and growing. That's why 3-year-old Net start-up Audible wants to cash in by targeting talking-book junkies and the growing number of busy professionals who want reading material served up while they're on the move.

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The Wayne, N.J.-based company has struck deals with 45 audiobook publishers, such as Simon & Schuster and Time Warner, to license, encode and sell their content on the Audible Web site for a fee. It's a hefty slice of business: Audible's partners account for 85 percent of all audiobooks.

After buying a book on Audible's site, a customer downloads an encrypted sound file, which uses Audible's own secure format. The file can be stored on hard drives for RealAudio playback, Windows CE devices or Audible's Mobile Player.

The Mobile Player gadget costs $100 and looks like a remote control: You can hook it up to your PC, let it download audio overnight and then listen to files later in the car or on the Stairmaster. Audible's encoded books can't be e-mailed or copied, which pleases publishers. And customers pay less than what they'd shell out for cassette tapes: Stephen King's latest book, Bag of Bones, costs $40 on tape from Amazon.com but only $18 in digital format from Audible.

"There's really no reason for cassette tapes," explains Audible's Don Katz, whose business card states his title as "founder." "Most people only listen to them once, and unlike books, you don't want to keep them around your house as decoration. Digital inventory is the way to go."

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Apparently others agree. Audible has raked in over $18 million in investments from big names like Kleiner Perkins Caufield & Byers, Patricof & Co., Intel and Compaq. Rumors that Microsoft had a large stake in the company were neither confirmed nor denied by Katz, who responds that Audible will be announcing another large investment in a couple of weeks.

Publishing outfits are happy, too. Judith McGuinn, the VP and director of Time Warner AudioBooks, says digital distribution can expand the audiobook market as both a marketing tool and supplemental revenue stream. "We were on board as one of the first publishers that got involved with Audible, when digital distribution of audio was a relatively new concept," says McGuinn. "Our experience with them has been very positive. They're growing. We see that reflected in the royalties reports."

However, Audible's mobile player isn't the only game in town. The MP3 format has grown popular enough to put the fear of God into the Recording Industry Association of America and spawn a hot new gadget the Rio digital music player. Audible is jumping on the boat. The company is working with Diamond Multimedia, creators of the Rio, to release some of its content in a secure format that can be played on the device.

Audible content, though, is more than just books. Inan attempt to cash in on the popularity of continuingeducation among, as Katz jokes, "yuppies whoyearn to be smarter," the company also offerslectures on Moliere and Beckett, archived copies ofradio shows such as National Public Radio's FreshAir, and Audible- recorded abstracts of the WallStreet Journal and the Economist. These areoffered to customers through an ongoing subscription model, just like in thetraditional publishing world. Katz is no stranger to the publishing business. He's a one-time staff writer for Rolling Stone and author of an eclectic body of work including a biography of Nike's Phil Knight, a history of Sears, and articles about fishing for catfish on Louisiana's bayous, logrolling and coondog racing. Katz got the idea for Audible after seeing a popular article he wrote for Outside copied, misattributed and mangled on several home pages.

"It was flattering at first, but that's how I used to pay the bills," says Katz. Which is why he came up with a way to protect intellectual property: make literature available over the Web in secure encoded audio and charge for it. In an environment like the Web in which people are loathe to pay for anything, much less audio (witness the success of MP3), Audible's business model seems risky but not to Katz. He thinks some things are sacred.

"People don't seem to mind ripping off the record labels, or they think, 'Oh those rich rock stars,' but with books it's different. If you told someone you shoplifted from Borders they'd probably think you were a big jerk."

Lessley Anderson is an assistant editor at The Industry Standard.