Audible purchase pits Amazon squarely against Apple
Posted
Jan 31 2008, 03:22 PM
by
Kim Peterson
Rating:
Amazon is buying audio book seller Audible.com for $300 million. That, and the release of the Kindle e-book reader, gives a pretty good picture of where the e-commerce giant wants to go in terms of online content. And it sets the stage for an interesting rivalry between Amazon and Apple.
Amazon shares rose nearly 5% to close at $77.70 today, reversing a month-long trend. Shares are down about 20% from the first of the year.
A few numbers about today's news: Amazon is paying $11.50 per share for Audible -- a 24% premium over yesterday's close. In buying the company Amazon will add at least another $110 million in annual revenue. Audible has strong revenue growth -- 2007 sales rose nearly 30% over 2006, due in part to strong distribution through Apple's iTunes store -- but the company wasnt profitable. (Though to be fair, its net loss in Q3 was only $200,000).
It's a good deal and a smart price for Amazon, which is rounding out its content offerings after launching last year an online store that sells music without any digital rights restrictions. In other words, its songs play on most devices that can handle digital music, including PCs, iPods, phones and Blackberries. Now, it can add Audible's 140,000 hours of audio programs to its store.
So in addition to music Amazon has a solid trifecta of printed books, digitally-printed books and audio books. Tie that in with the Kindle e-book reader, which has a headphone jack and can play music and audio books. CEO Jeff Bezos said yesterday the Kindle was outpacing his sales expectations and causing a bit of a scramble on the manufacturing side because of high demand.
Now, Amazon has a music store, a digital book store and a device that plays your purchases. Hmmm, sounds like another company we know. In fact, Apple is an important distributor of Audible's content, and probably a huge reason why Audible is still in business. Amazon could get nasty and pull Audible's books from iTunes, but that would eradicate a good chunk of revenue.
The next step? Maybe we'll see Amazon bring video sales into the mix. The company is steadily growing its Unbox video download service. Perhaps Kindle 2.0 will play video files, in which case we'll see the Apple-Amazon rivalry escalate into a full-blown battle.
