Amazon (NASDAQ:AMZN) is betting big on digital media. Thursday morning it announced the $300 million acquisition of Audible (ADBL) (a 7 percent premium to Audible’s $280 million market cap at the time of this writing). Audible is the leading provider of audio books in digital form, with a library of 80,000 titles. As Amazon begins to generate a greater share of its revenues from digital media, owning a digital publisher will help its margins. It should be able to offer audiobooks at a lower cost, which in turn will help grow that segment of its sales.
There is no doubt that as media becomes more digital, Amazon sees it as critical for its future. Media accounts for 59 percent of Amazon’s sales, most of that still being physical books , CDs, and DVDs. But towards the end of yesterday’s earnings call, Amazon CEO Jeff Bezos hinted at the growing importance of digital media for Amazon:
When media was largely physical, it made sense to buy it in the physical world. But as media becomes digital it does not make so much sense to buy them in the physical world. The bulk of the sales now are in the physical world. So our relative advantage over time should improve.
Amazon will be able to sells Audible’s audio books through its MP3 download store, in its regular book section, or directly to its Kindle electronic book reader, which has a headphone jack and can play MP3s. It is not clear how the deal will effect Audible’s relationship with Apple, though, since Audible’s books are sold through the iTunes Store as well. But Amazon just added about $90 million in annual sales to its revenues with this acquisition, and a leadership position in spoken-word digital content.