Quick Take: Tesla’s Streaming Ambition

Reports have emerged that Tesla is looking to build its own streaming music service. In practice, this will most likely be a case of Tesla building a streaming service that operates solely for Tesla users, rather than competing head on with Apple and Spotify. However, being solely for the use of Tesla users does not necessarily mean solely for use within Teslas. Not only will Tesla need to focus on what a great in-car streaming experience looks like, it will need to build a multi-platform, multi-device proposition that competes with the best in class mobile experiences like Spotify’s. Tesla users will have little interest in having to use one streaming service in the car and one everywhere else, having to build 2 sets of playlists and cloud libraries etc. So, a Tesla streaming service will have to be good enough to be the only streaming service for its users. Not simply an in-car experience.

The heart of the strategy though will be delivering a high end, in-car music experience. This probably means that high definition audio is part of the mix and possibly some exclusive content such as artist-hosted shows and Tesla sessions.

Tesla’s tight control of the in-car experience is now going to extend to music. One of the great opportunities delivered by interactive dashboards is the ability to bring your music with you. But that can often deliver a poor quality user experience, especially if the streaming service app has not been well optimized for the specific dashboard. Right now, 5% of US consumers have an interactive dashboard in their car but the rate rises to 18% of US music subscribers. Pandora already had 2.5 million in-car listeners in 2013, so this is a market that has both history and massive potential.

The benefits of Tesla building its own service in order to control the user experience are not guaranteed to exceed the cost, resource requirements and downright hassle of launching its own service. One thing to watch will be the degree to which other car manufacturers follow Tesla’s lead and start trying to control the in-car experience. There have already been some efforts in this direction, but so far partnerships and integrations have been the norm.

Smartphones defined the first era of streaming, in-car and in-home will shape the next