Audiobooks NZ founder Theo Gibson explains how digital royalties for audio books are paid works and competing with Amazon's audio book arm Audible.
What does your business do?
Audiobooks NZ was set up as an audio books production house. In 2010 there wasn't really any audio books being made on this side of the world so I set out to change that. The audio books that were being made had to be sold through American stores and they offered poor royalties so we set up our audio book web store and that allows us to sell our 105,000 titles, five to 10 per cent which is local content, and to get a really good royalty to New Zealand authors who make books.
We get professionally trained actors generally to narrate our books. The production house has being going about a year now but we have been working on it for a couple of years as there are lots of moving parts.
What was the motivation for starting it?
I trained as a sound engineer many, many eons ago and I've always been an avid listener of audio books when Audible audio books first launched in 2007.
Basically, no one was doing it here in New Zealand and I wanted to do more Maori language and Pacific Island content and there was, and still is, a need for content for this side of the world so that's why I set it up.
How big is your team?
It's just me full time and I've got a bunch of contractors who come on each job such as narrators and sound engineers. I also have a part-time web store curator.
What model does the business operate on?
We're moulded off the digital services of the time through our website. When people sign up they get a book credit to purchase an audio book each month and buy additional book credits for more books. We're rolled our iOS app out this week which is redesigned and then the android app is going to be following in the next couple of months, and we're also looking to do Amazon Alexa integration so people can use their Amazon Alexa to buy our audio books as well.
We're also looking at using these devices called PlayAways which are like handheld MP3 players but there just a straight stripped down MP3 player for people who aren't so familiar with apps. We signed up to be a distributor for PlayAway because there's a big part of the population who aren't great with smartphones and don't like using them so I'm trying to get PlayAways into places like libraries because kids quite like using them, and into retirement villages. An audio book is generally seven to eight hours long which works out to be eight CDs in traditional means.
What are your long term plans?
I'd really like to be the main distributor and producer of audio books in the region. I'd really like to expand and be able to produce a lot more Maori language and Pacific Island books, and really be the go-to for audio books in the region rather than people going to American services and seeing all that money go offshore.
Who is your biggest competitor?
If you look at numbers Audible is the giant in the area but that also works against them because they've got over 400,000 titles but that also means if someone is selling an audio book with them is lost whereas we have the ability to highlight local content and give it a bit more of a personal approach.
How does the royalties model work and how much do authors get per sale?
If an author wants their audio book made they approach us and we will cast a narrator and then record it for them so they will pay us for the production. We would then make that audio book and offer them a distribution deal whereby they basically get 65 per cent of the royalties per revenue of that book. We use the other percentage we get to promote the title and earn a little bit.
If we've got an audio book that we want to make and we have funding to make it we'll approach an author and cover all the production costs ourself and we'll give them a smaller royalty of 25 per cent if we were covering costs. If they choose to distribute through us then the royalty payments are ongoing and every time anyone buys the book they get a royalty. We work with 30 different distributors so when we distribute a book it goes everywhere in 170 countries.
What's the most challenging part about running a digital services company?
Finding the content. We're quite small and people don't really know we exist. There's a real need for it and people are really happy when they find us. After finding the content, explaining to people how the service works is a challenge trying to get people's heads around royalty splits and production costs or authors who are generally used to publishing a book can be a little bit tricky.
What advice do you give to others thinking about starting their own business?
Do your research and talk to as many people as possible about what you're trying to do. You can never be too prepared to go into business.