It's safe to say that the vast majority of drivers aren't streaming Spotify, Pandora or most other digital music services through their car audio systems. But that's likely to change as in-dash infotainment systems become more widely available, making it far more convenient for drivers to rock as they roll.
ABI Research analyst Dominique Bonte projects that 62% of the estimated 100 million cars shipped in 2018 worldwide will come with built-in connected infotainment systems like Ford Motor's Sync and General Motors' OnStar. That's up from less than 10% in 2012.
For many of these vehicles, drivers will have the option of buying a data plan for their cars, as if they were giant cellphones on wheels. GM, for example, has a deal with AT&T to provide high-speed 4G LTE cellular service to most of its equipped models, starting next year.
All of this means that consumers' ability to stream music, online news updates, social network feeds, weather, traffic and even movies and TV shows will become much easier, likely driving up consumption of all digital media. As a result, music services are racing to sign integration deals with auto manufacturers to have their products front and center on the dashboard menu. Spotify has contracts with Ford and Volvo. Rhapsody this year inked deals with Ford and BMW. Slacker has signed up Honda, Tesla, Chrysler, Subaru and Toyota's Scion. Pandora, which started down the road to car integration years ago, has deals with 20 automotive brands.
As a result, traditional broadcast radio is about to get a whole lot more competition as drivers and passengers can access practically the entire Internet for their news and entertainment. To be sure, terrestrial radio already has some serious competition in the form of satellite broadcaster SiriusXM, which had 24 million paying subscribers at the end of 2012. This year, SiriusXM projects that number will rise to 25.4 million. Car integration is at the heart of the company's success, with seven out of 10 new cars sold in the United States equipped with factory-installed satellite radio.
Once other music services become just as easy to access in the car through connected infotainment systems, the hope is that they, too, will take off. But this will require time. It takes anywhere from two to six years before a new design goes from drawing board to dealer showroom. In addition, drivers are hanging on to their old (unconnected) cars much longer, with the average age of vehicles on the road being more than 10 years old.
"It's a slow-moving industry, especially compared to cellphones," ABI's Bonte says. "But it will get there. Why? Because it's a must-have. No car manufacturer can afford not to have a connected infotainment solution. People are used to listening on their phones, laptops and tablets. And now they want to be able to continue that experience when they go into their cars."