Tesla’s reported plan to develop a streaming music service is a good way to hedge against the possible decline of the auto business, says one analyst.
Outfitting its cars with its own entertainment services could help the electric car maker earn money in a future where the auto industry becomes “a highly regulated and commodified utility,
where the transport service itself is possibly a money loser,” wrote Morgan Stanley analyst Adam Jonas, in a note published Tuesday.
Sources in the music industry say Tesla has been talking to music labels about the possibility of licensing music that would come bundled with its cars, Recode reported Thursday.
Tesla could sell 7 million cars to private owners and have another 2 million cars in its Tesla Mobility ride-hailing network by 2030, Jonas said in the note. By that point, though, there may not be much money in selling cars or offering rides. But, car companies may have “unique access” to the passengers in those cars for up to hours a day.
“These firms could cede 100 percent of the value of content to the likes of Apple, Alphabet, Pandora, Sirius or Netflix,” Jonas said. “On the other hand, they could say: ‘Wait a second. This is our venue. Our OLED screen. Our speakers. Our HMI. Our seats. Our software. Let’s at least give the customer a choice of using our own apps before we too quickly go the way of the pure handset manufacturers.'”
Some companies may be content selling hardware, but Tesla might not want to “just sit back and give the larger tech firms too easy of an open lane,” Jonas said. “Internet radio/music streaming is just a small part of it.”
In a world of self-driving cars, the automobile will essentially become “the fourth screen,” Jonas said. Autonomy will allow drivers to take their hands off the steering wheel and use their travel time to focus on other activities. Cars will also transmit user data back to companies, as apps, phones, and internet browsers do now.
Morgan Stanley recently downgraded Tesla to equal weight from overweight, citing potential competition from other companies, especially deep-pocketed tech companies like Apple or Alphabet. The music service, Jonas said, could be one way of attempting addressing potential competition from firms that could offer mobility services at a loss just to capture user data and offer content.
At the same time, Tesla may never make the leap to being a provider of shared cars and mobility services, and it may still face some stiff competition.
Source: Tech CNBC
The car will be the '4th screen' so Tesla should become a media company, Morgan Stanley says