With digital streaming already driving entertainment consumption at home and work, one of the next frontiers for digital entertainment growth likely will be the cabin of your car.
Driver-distraction concerns aside, some observers may argue that in-vehicle audio connectively isn’t a priority for consumers, since 73% of drivers say they still use FM radio “always” or “most of the time” during car trips. And even though CD sales have fallen off a cliff, 57% of vehicle owners say a CD player is vital in their decision to buy a car stereo or entertainment system.
And yet almost 40% of smartphone owners have accessed Pandora (NYSE:P) or some other music streaming service on their phone while in a vehicle, according to NPD Research.
Expect more of that as the economy heals and auto sales increase. Worldwide, new vehicle sales in 2012 are forecast to increase 6.7%, to 77.7 million vehicles, over 2011, although the sales increase in the U.S. is expected to be relatively modest. Global automobile market research firm Polk says the luxury segment in the U.S. market will grow the fastest, rising more than 14% this year.
Consumers’ desire for more fuel-efficient automobiles is steering many toward showrooms, but many are taking the opportunity to upgrade their in-vehicle entertainment and connectively. According to NPD’s Retail Tracking Service, 42% of all in-dash players sold in 2011 were equipped with Bluetooth short-range wireless connectivity.
Possible paths to further in-vehicle connectivity
That bodes well for audio electronics manufacturers such as VOXX International (NASDAQ:VOXX) and electronics distributor Avnet (NYSE:AVT). Satellite radio provider Sirius XM Radio (NASDAQ:SIRI) also is well positioned because it already serves about 23 million subscribers, including the 1.7 million it added in 2011. The company expects about 1.3 million more subscribers to sign up by the end of 2012.
So is the market for in-vehicle entertainment saturated? And if not, how long will it be before consumers tap into, say, in-vehicle video streaming?
Probably not long, although key issues will be service quality and affordability.
Direct TV (NASDAQ:DTV) and Dish Network (NASDAQ:DISH) could be best positioned to deliver video content, as it does now for many recreational-vehicle owners. Vehicle connectivity also may offer new opportunities for wireless carriers AT&T (NYSE:T), Verizon (NYSE:VZ), Sprint (NYSE:S), and USA T-Mobile, the U.S. wireless arm of Deutsche Telekom (PINK:DTEGY), if consumers can be sold on data plans tied specifically to subscribers’ vehicles, where movie or game content could be delivered via the customers’ smartphones.
Of course the quality of satellite video could be compromised by unavoidable factors such as bad weather and whatever structures might block the satellite feed. And as cell phone users already know, the quality of video delivered by wireless carriers will depend on the strength of the network, the number of users on it, and the amount of information they download.
But another obstacle to wireless in-vehicle video connectively may be affordability. With in-home television subscriptions and gaming activities giving way to online and mobile alternatives, wireless carriers are looking to data plans to boost profits. Those data plans can be pricey, and many subscribers might view the added cost of a vehicle-only plan more than they can afford.