Mary Lou Kalbow started listening to books while driving a five-hour rural postal route in Minnesota about five years ago. Now she downloads titles by Janet Evanovich, Jonathan Kellerman and James Patterson to her portable MP3 player and listens all day while she works as a massage therapist.
"I like to be entertained. Mystery, action, a love story. Something that keeps me on the edge of my seat," said Kalbow, 52.
Kalbow is one of the thousands of devotees of Audible Inc., a pioneer in the listenable literature business that remains the Internet's top provider of audio books.
The company is about to need plenty more people like her.
Just as Audible is finally beginning to show profits, the prospect of stiff competition looms from Amazon.com Inc., a partner that now plans to launch its own audio book store.
Another loss came with the departure of National Public Radio, whose programs are no longer available to download from Audible's Web site.
Many investors revolted when Audible plowed several million dollars in revenue back into developing such services as partnerships with XM Satellite Radio Holdings Inc. and Texas Instruments Inc. for taking audio books on the road, including on next-generation cell phones.
And some analysts now think Wayne, N.J.-based Audible could be a takeover target.
"Having faced no significant competition so far, Audible has not been able to sustain a profit despite reasonably good revenue and subscriber trends," said Frederick W. Moran, an analyst with the Stanford Group. He wondered how the company would fare in a price war against bigger Internet companies that "could much more efficiently build and launch their own sites."
For now, Audible is the market leader. It has more than 225 partners, of which 60 percent are exclusive, giving it more than 70,000 hours of audio programs from books, broadcasts, entertainers, magazines and newspapers. It remains the top provider of spoken-word content at Amazon and the Apple iTunes Music Store, and its digital downloads are compatible with more than 135 devices.
Revenue is projected to go as high as $65 million this year, nearly double the $34 million in sales that Audible posted in 2004. The company lost $8.3 million last year.
However, analyst David Sterman of Halpern Capital, noted that a rival such as Microsoft Corp. or Yahoo! Inc. could quickly grab a big chunk of the market by offering audio books on music platforms they are now developing. (MSNBC is a Microsoft - NBC joint venture.)
"Someone like Microsoft and Yahoo could lose money for several years to build market share, but Audible is not in a position to do that," Sterman said.
A buyout of the company is not out of the question, he said. "It is very clear that there is a great deal of value in the Audible business model," Sterman said. "Whoever buys Audible is very quickly the No. 1 player in the market."
Audible is not standing pat.
Other delivery methods
As sales of Apple Computer Inc.'s iPods cool, Audible has moved into other delivery methods. For example, XM and Audible next year plan to market a new handheld device that can play programs from the satellite radio service and Audible's audio versions of books and newspapers.
In the other recent joint venture, Texas Instruments Inc. would produce chips that permit Audible software to be loaded onto cell phones as well as other devices, allowing users to download and then listen to a book on their phone. (An earlier venture by Audible to deliver content to handheld computers through the AT&T Wireless network was test-marketed but never got off the ground. This product, in contrast, would not be limited to one carrier's network).
In June, Audible entered podcasting, enabling content of periodicals, such as The New York Times and The Wall Street Journal, to be delivered automatically to its customers' devices.
It also has gone international, launching its United Kingdom Web site in June, a site for French language downloads in March, and a German site in December.
All this comes as Audible absorbs NPR's departure, which ended a six-year relationship.
"We are working on a strategy that would be more valuable to our stations and our listeners," NPR spokeswoman Jenny Lawhorn said. "We've been approached by all the major companies involved in podcasting, but we can't say they will play a role in our strategy."
Amazon remains a partner, but it is preparing its own audio section with a wider selection and "one-click shopping," spokeswoman Patty Smith said. Now, people purchasing Audible products at Amazon.com complete the transaction at Audible's Web site.
If Audible founder and CEO Donald Katz is disappointed or worried, it is not apparent.
The NPR separation is merely "a strategic change for both of us," while Amazon faces many technological hurdles if it launches a competing service, he said.
"It's not easy, and we get better at it all the time," Katz said.
As for a possible buyout, Katz responded, "I'd never comment on that. We're pretty happy being Audible right now."
Audible won't disclose how many people are regular subscribers to its service, but said it added 55,400 subscribers in the first three months of the year, compared to 23,000 in the same period a year earlier.
One loyal subscriber is Douglas G. Manter, 44, a computer technician for AT&T Corp. in Englewood, Colo. He turned to Audible nearly four years ago after exhausting the cassette rentals at a book store.
His subscription, $15.95 for two books a month, allows him to stuff his iPod with "escapist" literature and historical fiction.
"I don't think they should be too threatened by Amazon.com," said Manter, who praised the company's technical support. "They have their act together."
Less popular was Audible's decision announced in February to reinvest money in expansion rather than simply return it to the bottom line. Investors reacted by slashing Audible's stock price into the teens from a 52-week high of $30.65 in December.
Katz, an ex-writer who started Audible in 1995, defended the reinvestment, saying it was necessary to develop automated delivery of audio to cell phones and other projects.
"Doing the best thing for the mid-term and long-term," he said, "superseded doing the best thing for the short term."