At a time when the book industry faces intense economic pressure, reports of an exploding audiobook market leave independent authors and publishers wanting a piece of the action. New technology makes it easier than ever for them to produce and distribute audiobooks. Still, making a profit is more challenging.

The cost of creating an audiobook runs about $400 to $500 per “finished hour,” which includes both narration and editing. Multiply that by the length of time it will take a performer to read your book: about 9,300 words per hour at a steady clip. At that rate, an 80,000-word book would run about 8.5 hours and cost at least $3,400 to produce. Many voice actors eschew deals that require them to work in exchange for a share of future royalties. (Who can blame them?) More typically, publishers front the expense.

“There’s no guarantee that you’re going to get your money back,” says Mark Coker, founder and CEO of Smashwords, an e-book distributor for self-publishers. Of course sales will vary by author, and from one project to the next. But, generally speaking, if a book is selling poorly as an e-book, “it’s not going to make itself better as an audiobook.”

As for sales channels, Amazon dominates the market through Audible.com, its audiobook arm. In 2012 they opened the platform broadly to self-publishers and cut royalties by about half. That brought more – and cheaper – content to the site, making it even harder for publishers to profit, Coker says.

Change may be in the wind, though. Last month Smashwords announced a partnership with Findaway Voices, a new distribution platform. And early last year Audible and Apple ended the agreement that made Audible the sole supplier of audiobooks to iTunes. (The arrangement had come under scrutiny from German antitrust regulators.)

Theoretically, this could lead to a fortunate series of events for indie publishers: increased competition that would create new distribution paths, induce Audible to improve per-book royalties and reduce the financial risks for publishers.

To reach a growing number of sales channels, they can now choose from among three major distribution platforms. (All offer optional production services.) At the top of the food chain is ACX, owned by Audible. It controls distribution by indies to Audible; lists those audiobooks alongside other formats on Amazon.com; and, until alternative arrangements are announced, remains indies’ only conduit to iTunes. Publishers can deal directly with ACX or go through an aggregator, like Findaway Voices or Author’s Republic, both of which distribute to more than a dozen additional outlets.

Here’s how to navigate the options.

Maximize sales channels. Beware of exclusive arrangements. The one from ACX pays royalties of 40%, in contrast with 25% under a non-exclusive contract. But you are not permitted to distribute your Audiobook outside of Audible, Amazon and iTunes. And that rules out libraries, which are an important channel for small publishers.

“There’s so much discovery and experimentation that happens in the library market that doesn’t necessarily happen in the retail market,” says Michele Cobb, executive director of the Audio Publishers Association. “When someone’s buying something outright, they’re not as willing to try new authors and new things.”

The most lucrative library sales, which fetch up to three times the manufacturer’s suggested retail price, allow only one patron at a time to borrow the book. OverDrive is the primary distributor of audiobooks under this business model.

In contrast, with a “pay per circulation” arrangement, an audiobook is available to an unlimited number of patrons simultaneously. Royalties are lower, but a “sale” occurs each time a library user checks out the audiobook. Hoopla has been the leader with this model (figure royalties of about 60 cents per unit), but OverDrive recently added it to their offerings.

Regardless of the per-unit price, Hoopla helps small publishers get the most exposure possible for their titles, says Cobb, who provides marketing advice to publishers through her company, Forte Business Consulting.

In an episode of his “Smart Author Podcast,” Smashwords’ Mark Coker offers tips on how to market e-books to libraries. Many would work equally well with audiobooks.

Meantime, publishers can help make readers aware that they are able to borrow audiobooks from libraries – something that even audiobook enthusiasts may not realize. There’s also a way from within the OverDrive app for library patrons to recommend a book. Through posts on social media and on a book’s website, you can outline them for readers and potential listeners.

Open the OverDrive app on your smartphone and follow these easy steps:
1) Go to “Bookshelf”
2) Scroll down to “Add a title” and click. It will take you online to your library’s website.
3) Search for [insert book title here]
4) Scroll down until you see the book cover and click “recommended”

“You never know where your book is going to sell until you see it on every platform,” says Darren Speers, general manager at Author’s Republic. Distributing through an aggregator makes it easy to test the waters.

There’s considerable overlap between the sales channels of Author’s Republic and Findaway Voices, though each also offers unique outlets (see chart, below). So far only Author’s Republic distributes to Storytel – a growing international network. For publishers that own world rights, this could be a valuable market, Speers notes.

If you want to work with both aggregators, speak to company representatives first to avoid mix-ups and duplicative efforts. Though it’s also possible to switch aggregators (or to a direct deal with ACX) down the line, that’s likely to interrupt your distribution for about two weeks, company representatives say.

Be realistic about royalties. As in other publishing contracts, they are generally expressed as a percent. The question is: a percent of what?

How you price your book plays a role, but not with Audible. Though the company offers guidelines on its website, based on the length of the book, it warns that Audible “retains the sole discretion to set the price of the Audiobooks it sells.”

For example, last week I searched for my book, Four Seasons in a Day: Travel, Transitions and Letting Go of the Place We Call Home, three different ways within the Amazon system and came up with five different prices for the audiobook. On the book’s Amazon page, the price was $14.95 for Audible “members” (those who pay a monthly fee for one book credit per month); $17.46 for non-members; and $0 as a sign-up incentive for new Audible members. On Audible.com, the suggested retail price of $19.95 displayed, until I signed on as an Audible member, and then the cost dropped to $13.96 or one credit.

Though the majority of books are purchased using membership credits, the most favorable royalties are for sales to readers who are not Audible members. For a non-exclusive which, as noted above, is the only ACX arrangement I would consider, the royalty is 25% of Audible’s “a la carte” price. (Again, this may be different from your suggested retail price.) The same rubric applies to sales to iTunes.

Under a complex formula, per-book royalties for membership sales are about half as much, according to the company website. Since the formula for membership sales incorporates many variables, and Audible does not reveal the sums attached to any of them, “you don’t know what the royalty is going to be until after the fact,” says Kelly Lytle, editor of Findaway Voices. For all other sales partners, publishers can figure out in advance what they will earn; a schedule attached to the Findaway Voices contract provides the information they need to do that.

“I’ll take that as feedback from the community and something we can look into,” says Michael Stover, senior director at ACX. “We’re not trying to be opaque.” And here’s an example: With a non-exclusive arrangement, the per-unit royalty on a $30 book bought with membership credits would be approximately $4, he says.

I used the Findaway Voices royalty schedule to do an apples-to-apples comparison (again, with the understanding that the sample non-exclusive royalty Stover provided upon my request is approximate): On Audiobooks.com the royalty for books bought through a credit-based subscription is 40%, or for this book $12. A publisher distributing through Findaway Voices gets 80% of that, or $9.60. That’s $5.60 more in royalties than the same book would fetch from an Audible membership sale (assuming the publisher is dealing directly with ACX, rather than through an aggregator).

To be sure, there are benefits to having a book available in the world’s largest bookstore. As part of the Amazon family, Audible becomes a destination for buyers who don’t realize that they can often purchase the same audiobook on Nook (part of Barnes & Noble) and Libro.fm (which partners with independent bookstores), for instance. But as this example illustrates, publishers, in effect, pay a high premium for the virtual shelf space.

AUDIOBOOK DISTRIBUTION PLATFORMS AT A GLANCE

 ACX (Non-Exclusive)Author's RepublicFindaway Voices
Sales channels
Audible, Amazon,
iTunes
ACX channels plus more than 12 others, including library distributors OverDrive and Hoopla; and Storytel (reaching international markets)ACX channels plus more than 12 others, including Scribd, Nook, Playster
Royalty percentage to rights holderSales to non-members: 25% of “a la carte” price

Sales to members: Royalty is about half as much as for sales to non-members
70% of royalties earned through sales channels (a percent of a percent) 80% of royalties earned through sales channels (a percent of a percent)
What royalty statement showsBreakdown by various sales channels within Audible; $50 “bounty” if book is the first download by new Audible memberTotal units and total royalties (no breakdown by sales channel)For each sales partner, shows: business model, royalty rate %, digital list price, quantity sold and royalty earned
CaveatContract subject to change without notice and lasts for 7 yearsIf you list fewer than 10 books, payment only via PayPal, which subtracts a 5.25% fee from your receiptsNew to the market

Plan strategically. A detailed royalty statement can help you direct listeners to platforms that pay higher royalties or generate more sales.

For each sales partner, the one from Findaway Voices shows: business model, royalty rate (expressed as a percent), digital list price, quantity sold and royalty earned, Lytle says.

ACX breaks down sales by various channels within Audible (members versus non-members, for example). The royalty statement also shows if a rights holder has earned the $50 “bounty” that’s awarded if a book is the first download by a new Audible member, Stover says. (This bounty applies to both exclusive and non-exclusive ACX users.)

In contrast, the dashboard of Author’s Republic, which I have access to as a publisher, shows only total sales by dates selected and the total royalties earned for those dates. Unlike with Findaway Voices, its contract does not spell out the royalties that each sales channel pays.

At my request, Speers sent me an Excel spreadsheet with a breakdown by sales channel showing total units sold and royalties earned within each channel since Four Seasons in a Day went live as an audiobook in July. For sales to ACX, it did not include the detailed information that would have been available to me if I had dealt with ACX directly. Speers says that Author’s Republic plans to add more detail to its dashboard later this year.

Maintain your independence. Financially, a hybrid approach to distribution makes the most sense. For books distributed to iTunes, Amazon and Audible, you can enter into a non-exclusive deal directly with ACX, and avoid splitting these royalties with an aggregator. You will also have access to the detailed royalty statement and a dashboard from which you can track your sales, practically in real time.

One potential glitch is that ACX contracts require a seven-year commitment, which Stover says is not negotiable. And, thinking ahead, that could someday interfere with your freedom to distribute to iTunes without going through ACX.

Currently, it’s not clear what other routes will be available – whether this would be done through an aggregator or through direct uploads to iTunes. When I recently inquired via iTunes Provider Support about direct uploads (as it’s now possible to do with iBooks – Apple’s e-books app), a member of their team replied: “Audiobook distribution isn’t included in the iBooks contract, and audiobook contracts are currently not available. We obtain audiobooks from our partner Audible.”

The upshot: In effect, ACX remains the sole source of indie audiobooks for iTunes. Apple’s press office did not respond to a request for comment.

For the moment, dealing with an aggregator doesn’t relieve publishers from a seven-year deal, since it also applies to the aggregators’ agreements with ACX. But there are efforts afoot to change that. Author’s Republic is working on a direct-to-Audible option, which would not include the seven-year commitment, Speers says.

Expect downward pressure on prices. This trend, fueled by the availability of so much free content online, has spread throughout the publishing industry. With everything from downloadable movies to podcasts competing for people’s (increasingly short) attention, we test the limits of how much they can consume. And as it is, only 24% of the American public listens to audiobooks in a given year, according to a recent Audio Publishers Association survey.

With many new retailers entering the audiobook market, including Walmart (in partnership with Kobo) and Google, readers may want a monthly fee to offer more than Audible-style credits, Cobb says. As the market evolves, the only way to satisfy listeners’ appetites might be with subscriptions for all-you-can-eat.

Deborah L. Jacobs, a lawyer and journalist, is the author most recently of Four Seasons in a Day: Travel, Transitions and Letting Go of the Place We Call Home, about her adventures — and misadventures — living in France. The audiobook version, narrated by Tavia Gilbert, is available from your favorite retailer or library. Follow Deborah on Twitter at @djworking and join her on Facebook here. You can subscribe to future blog posts by using the sign-up box on her website’s homepage.

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