The proliferation of all things digital continues to resound throughout the audio industry. An industry founded on audiotape moved smoothly into the compact disk age and is now embracing the consumer penchant for digitally downloading product. According to Chris Lynch, publisher of Simon & Schuster Audio, downloads were up 300% from 2005 to 2006, and he expects more growth in 2007.

Although the advantages of downloadable audio are many—no returns; no duplication, packaging or warehouse costs; luring a fresh, hip customer base—it has not become the cash cow many had imagined. No matter how an audiobook title is distributed, the cost of making a master recording only keeps going up, beginning with escalating figures—and increased competition—for audio rights and continuing with narrators' fees, production and studio expenses and digital rights management. "Right now, the biggest part of staying nimble is bringing recording costs down," says Ana-Maria Allessi, publisher of Harper Media.

However, belt-tightening on the publishing side is easier said than done. In a world where the price of electronic playback devices keeps coming down, and consumers can buy DVDs of feature films for $14.95 and download fully produced songs for 99 cents, getting shoppers to pay what would be considered a fair price for an audiobook is a tough sell. "The average consumer does not understand the scale of our business as compared to music or other industries," Allessi notes. "They want a lower price, and I have to give it to them."

Continued Growth Projected

The meteoric growth in sales at S&S was not typical of the audio industry in general, though growth was still robust. According to the Audio Publishers Association, digital downloads grew by 50%, to 9% of total audiobook sales in 2005, up from 6% in 2004.

Audible, the leading distributor of downloadable audiobooks to consumers, and the largest digital partner for many publishers, celebrates its 10th anniversary this year. Senior v-p and publisher Beth Anderson notes that the company still considers itself "in the early days of market growth." Audible's membership grew by more than 50% from 2005 to 2006, and the company has nearly 350,000 subscribers.

The majority of audio houses now publish nearly every new recording in downloadable formats in addition to traditional ones. "We do 99.9% of our titles as downloads as well as CDs," says Lynch. Some companies, like two-year-old Audio Evolution, publish only downloads. Still, the problem of pressure on prices is problematic. Consumers have long questioned why audiobooks on CD typically cost more than the hardcover print book, for example. As downloads, priced lower than CDs, help build a greater awareness of audiobooks—unanimously a good thing—price point becomes a central point for the publisher. Retailers already know that trying to justify audio economics to consumers doesn't work. The bottom line is shaping up to be a question of volume. "Digital sales are a fraction of what CD sales are," says Allessi. "We must sell three times as many downloads to make the same money. And we won't bring in that many consumers, even with great marketing, so we must increase the pool of listeners."

One tack for attracting new listeners is to more clearly demonstrate the unique value of the audio experience. Many publishers now routinely add bonus materials to a number of their audio releases, whether it's an author interview, original music, additional commentary or a visual, enhanced-CD element. "Nearly 50% of our new programs published contain some sort of bonus feature," says Mary Beth Roche, publisher of Audio Renaissance.

In an effort to catch a larger segment of younger listeners, more companies are publishing children's titles, including Scholastic, Brilliance, Simon & Schuster, Hachette Audio and Harcourt, which recently announced it will distribute Full Cast Audio. Listening Library, the children's division of Random House Audio, has begun a major consumer awareness campaign (largely aimed at parents) it is calling "Listen to the List." Monthly print ads in the New York Times will highlight audio editions of print book titles that appear on the paper's bestseller list.

Lynch of S&S Audio comes back to the idea of flexibility when considering the road ahead. "We need to keep abreast of what's happening with new technologies and find ways to capitalize on the download phenomenon. For the foreseeable future, we have to work with the idea that we can sell CDs in one place, Playaways [self-contained MP3 titles] at airports and in libraries, and downloads in various outlets as well."

For Eileen Hutton at Brilliance, "MP3-CDs have become the perfect transition medium, bridging the gap between traditional CDs and downloads. Many people are choosing to buy MP3-CDs and load them onto their player of choice. MP3-CD sales grew more than 50% in the last year," she says, "and until the format wars are settled, I think these sales will continue."