In the second of a two-part series, Jan Stojaspal explores how the telematics value chain is trying to monetize the connected car
It takes time for car makers to figure out what to charge for the extra value content and apps bringing to their vehicles. For now, many are providing in-car content free of charge for a limited period in the hopes of building awareness and selling more cars. Toyota’s Entune services are free for the first three years, and about $100 a year thereafter. And Ford structures its SYNC offerings similarly, providing traffic, directions, travel services, movie listings, stock quotes, horoscopes and operator back-up free of charge for the first three years. AppLink, its smartphone integration solution, is free for the life of the vehicle.
Greg J. Ogonowski, president of Modulation Index, a two-man outfit based in Diamond Bar, California, that makes StreamS HiFi Radio, a unique audio player capable of streaming high fidelity sound over most EDGE/3GPP cellular networks, is happy with this arrangement. “We’ve got an app that [Pioneer] desperately wanted to get real-time streaming radio on their device; we wanted to pump up our sales,” he says, calling it a “mutually beneficial” relationship.
But others like ESPN are not ready to start giving their content away. “All our partners today pay for our content, and so if we are going to be distributing via these new platforms, we are going to need to maintain that,” says Patrick Polking, senior director for business strategy and development at ESPN Audio. “Otherwise our existing business is challenged.”
What Polking is hoping will eventually emerge is an agency-style model, where content is distributed by media aggregators just like it is done in the cable TV industry. “The car is the TV in this comparison and the car needs to figure who those cable operators are that can provide the broadest array of and best services as opposed to having to go out and do 20, 30, 40 different deals with the media companies or have a thousand app developers come and want to try to develop an app for your car,” he says. “To me, it’s a waste of time.”
Is there even money to be made? It depends on the content. “The big unanswered question is, ‘Do you actually have something to sell?’” says Richard Robinson, director, automotive multimedia and communications service, at Strategy Analytics. Companies like Google or ESPN obviously do. But there are others that Robinson is not so sure about. “Every day we hear about one of these companies, whether it’s MOG or Stitcher coming to market, and it’s entirely unclear as to how they are going to make money,” he says. “They are great ideas, and I really like Internet radio-based stuff and that whole concept, but I still don’t understand the business model behind it.”
There are many other unknowns to monetizing the connected car.
For example, it is unclear whether car manufacturers can make money operating their own app stores as some are considering. Strategy Analytics’s Lanctot is doubtful. “Car makers can use apps to sell cars,” he says. “I am a sales guy. I can tell you, ‘Do you have an iPhone?’ ‘Yes.’ ‘Do you use Pandora?’ ‘Yes.’ ‘Well, guess what? You’ll be able to use Pandora in your car.’ That’s something the salesman can easily understand and relate to the customer and it can help close the sale. Whereas saying, ‘Oh, you will be able to buy music in the car.’ It’s like, ‘Well, I already have that experience on my phone, why would I want to pay again in the car?’ It doesn’t mean that there is no opportunity, it’s just limited in what they will be able to do.”
Another unknown is whether profits will be shared across the entire value chain or will go to just some of its participants. “There is a whole value chain that has opened up,” Robinson says. “The problem is that all of them are sort of claiming ownership of that. They want to move themselves a bit more up-market in a way, from just being, say, a dumb pipe provider or just a box provider. I think there is certain paralysis that sometimes creeps in, because people are not prepared to get involved at all because they are unclear about what’s in it for them.” (For more on the telematics value chain, see Telematics and the connected vehicle value chain and Telematics innovation: Twilight of the tier 1s?.)
It also remains to be seen who will ultimately end up running the whole chain. Will it be the car OEMs, as Luca De Ambroggi, senior analyst for automotive infotainment with IHS iSuppli, thinks? Or will the wireless carriers end up running the show, leveraging their huge subscriber base, ready access to content and experience running back-end services? By most accounts, it’s too early to tell.
The various app and content providers now vying for the car industry’s attention would, of course, love nothing more than an unfettered access to the vehicle, ideally via a standardized platform that works the same way across multiple brands. But that is unlikely to happen any time soon—if ever.
From the possible candidates for such a platform, MirrorLink, which replicates the screen of a supported smartphone on the car’s in-dash display and uses the car’s built-in controls to operate the phone’s resident apps, is the frontrunner. But having only launched, it will take time before it has some traction.
In search of the right platform
Readily available software development kits (SDKs) from the major car manufacturers would also help, but few car makers have them at the moment or are inclined to their general release.
HTML5 with its capacity to use a standard browser to launch complicated multimedia apps is also seen as having potential to simplify things, but it will take years before it starts replacing smartphone apps or some of the premium embedded solutions available today. (For more on HTML5, see Telematics and the next-generation Web.)
“There is a limit to how much locally running HTML5 apps can do,” says Dominique Bonte, group director for telematics and navigation with ABIresearch, a technology market intelligence agency. “Maybe over time it will shift a little bit more toward HTML5 and there will be less native apps [on smartphones]. But I think for the foreseeable future, it will be both. That’s why I say that smartphone integration will remain important for many years to come.”
In a way, Ogonowski lucked out that Pioneer was his first project for the car industry. Because Pioneer already builds to Apple’s hardware standards under a so-called MFi (Made for iPod/iPhone/iPad) licence, Ogonowski was able to tailor StreamS HiFi Radio to a familiar environment. “They already have the MFi agreement in place with Apple; we have our app developer license with Apple,” he says. “All we needed to do is get two organizations together that had one of each and, bingo, we were there.”
Working with other partners may be a lot more complicated. But it can be done as Pandora has demonstrated by building partnerships with no fewer than 13 brand partners on the OEM side and six on the aftermarket side in the past two years.
Although the strength of its brand was no doubt a big factor, it helped a great deal that Pandora invested in developing Pandora Link, its own application programming interface (API) that it gives out to partners so that they can build to it. “Our standard on our end has allowed us to manage this wide-ranging integration across so many different partners with limited resources,” says Geoff Snyder, director of automotive business development at Pandora.
Jan Stojaspal is a regular contributor to TU.
To read part I of this series, go to Telematics: Making the most of the app opportunity, part I.
For more on apps, join the sector’s other key players at Content & Apps for Automotive 2012 on April 18-19 in Germany.
For more all the latest telematics trends, visit V2X Safety & Mobility 2012 USA on March 20-21 in Novi, MI and Telematics Detroit 2012 on June 6-7.
For exclusive telematics business analysis and insight, check out TU’s reports on In-Vehicle Smartphone Integration Report, Human Machine Interface Technologies and Smart Vehicle Technology: The Future of Insurance Telematics.
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