Tuning in to Tesla Radio

The rumor is spreading far and wide that Tesla Motors’ CEO Elon Musk is talking with major record labels about creating a streaming audio service dedicated to Tesla vehicles. The widespread industry reaction is head scratching and eye rolling at what is seen as the latest chapter in the Musk follies – Solar City, Model 3, Autopilot, Gigafactory – but a closer look reveals genius at work.

It was five years ago that Harman acquired Aha Radio and began work on an in-dash content aggregation platform. Later iterations suggested that Aha Radio could become a platform for car companies to curate their own branded content delivery experience in their cars with the help of Aha. Unfortunately, Harman and Aha sought to preserve Aha as a branded aggregation platform and the possibility of “Honda Radio” or “Mazda Radio” fell by the wayside.

Harman continues to work on the Aha platform – expanding it into the Ignite data aggregation and monetization system it offers today – but the OEM-branded radio ship has sailed. What the car companies failed to perceive, but which Musk has grasped, is that core vehicle development expenditures in the world of connected cars is slowly but inexorably shifting away from expensive internal combustion engine engineering teams and towards data management and connectivity platforms.

In the auto industry of the future data will indeed be the new vehicle fuel and the engine driving industry growth will be artificial intelligence. The change is coming about both slowly and rapidly and Musk and Tesla are at the tip of the spear because of the complete commitment to an electrified powertrain.

Car makers have struggled with the expensive process of trying to create and maintain their own content and data aggregation platforms. Most car makers, with the exception of Toyota and Tesla, have thrown in the towel on trying to own the in-vehicle content delivery system, recognizing and deferring to the greater resources and band recognition of Apple and Alphabet. This was a mistake.

Detached from the monumental investments associated with the pursuit of incremental enhancements in performance and fuel efficiency sought be car makers dependent on ICEs, Tesla is free to pursue the next generation challenges of owning and curating content consumption in cars. Tesla’s ICE-focused competitors have been more amenable to surrendering some control to the likes of Apple (CarPlay) and Alphabet (Android Auto) and SiriusXM. Not so Tesla – and Toyota.

In the world of electrified and connected cars differentiation will be less centered on powertrain than it will be on customer engagement. With a much lower service component (fewer moving parts, no oil changes, etc.) car companies will need to leverage connectivity and in-vehicle communication platforms to reinforce brand messages and raise the level of customer engagement.

Tesla understands that content consumption in the connected car is a privileged value creating proposition and one which is ripe for value creation and new forms of customer engagement. Apple and Alphabet with CarPlay and Android Auto are offering one approach. Pandora, Spotify and SiriusXM each have their own approaches.

Combined with broadcast radio and the driver’s own recorded content, content consumption in the car is rapidly fragmenting with no single winner. In spite of these incursions in the dashboard the car radio remains the ideal, contextual, free, content delivery platform integrating entertainment, news, weather, sports and traffic in a distraction mitigated hands-free/eyes-free platform.

It’s no coincidence that the dominant advertisers on broadcast radio are focused on selling, servicing or insuring cars. The symbiosis is powerful and enduring.

SiriusXM has demonstrated that there is the potential for billions of dollars in subscription-based revenue. A Tesla-created content delivery platform is more likely to be ad-supported focusing on what is the single most attractive captive listening audience anywhere: Tesla owners! Having a connected and contextual listening experience with audience measurement elements integrated with automated driving presents a unique value proposition that ANY advertiser would want a piece of.

Pandora-like, Tesla’s system could be free/with ads or ad-free/with subcription – but could also integrate all content/information sources in a single platform – WITHOUT SiriusXM/CarPlay/Android Auto. Tesla Radio will be the answer to these “alien” offerings from third parties with their “own agendas.”

Like everything else at Tesla, the imperative is in-house, vertically-oriented, bespoke solutions not contingent or dependent on any dominant external “platform” provider – ie. no thank you Apple, SiriusXM, Microsoft, HERE, Alphabet, etc. etc. This isn’t always good strategy and won’t always produce sound results. Tesla bid Mobileye adieu after the fatal crash in Florida followed by some desperate scratching and scraping to put together an equivalent alternative self-driving system.

Tesla sees that connected cars are a platform opportunity. From the beginning, Tesla has been building its own platform unreliant on the platforms of others. The strategy is clear from sharing patents to building the largest global fast-charging network – it’s all about the platform.

Competing car makers have surrendered the opportunity to “take over” the customer engagement opportunity in the car cabin around content consumption. In other words, competing car makers have surrendered or are surrendering their platform potential.

Companies like Honda flirted with this in the early days of smartphone integration in cars and Internet connections to dashboards. But, ultimately, Honda surrendered to the Apple/Alphabet pressure and has taken a more conservative path – along with the rest of the industry.

Toyota has resisted the Apple/Alphabet pressure but has so far failed to offer a compelling competing solution. (Toyota has signed on with Ford-developed Smart DeviceLink which may yet emerge as an open source means for car makers to create their own platforms.) Tesla understands that every car company should be branding the in-vehicle content consumption experience. Think Chevy Radio, Ford Radio, Chrysler Radio – an integrated, customized, content experience curated for owners of a particular brand’s cars whereby urgent messages – regarding recalls, service messages, emergency notifications, local concerts etc. etc. could be communicated within the car and at the command of the vehicle owner: “Tune to Tesla Radio for the latest information on vehicle updates, recalls, new charging locations and Tesla owner events in your area.”

Anyway, the opportunities and possibilities are endless – and Tesla wants to take advantage. It may be years before car companies recognize that the in-dash infotainment system is rapidly becoming more than just the car radio. That system is becoming an essential information gateway between the car and the cloud and the car company and the owner. By the time the competition understands this, Tesla will be miles down the road creating new customer engagement experiences. Stay tuned.