A surprising new report suggests that Elon Musk’s Tesla, known for its electric autonomous vehicles, may have musical ambitions.
According to Recode (opens in new tab), music industry sources have said that Tesla has been in talks with major music labels to create its own streaming service that it would then bundle with its cars.
Details on how far along these talks are or what’s driving Tesla’s thinking here are thin on the ground. According to Recode’s sources, the company is looking at offering “multiple tiers of service, starting with a Pandora-like web radio offering.”
Tesla itself hasn’t confirmed the reports, but it hasn’t outrightly denied them either, telling Recode that it “believes it’s important to have an exceptional in-car experience so our customers can listen to the music they want from whatever source they choose.”
The news that Tesla is considering this service has raised more than a few eyebrows.
The music streaming market is already saturated – Spotify and Apple dominate to the point that even Tidal, with its exclusive content and impressive financial backing, has struggled to gain traction.
Tesla already has a deal (opens in new tab) with Spotify in some of its markets and it streams on-demand music through Slacker on its in-car dashboard. With partnerships already in place why would it not simply want to expand on them?
Without comment from Tesla we can only wonder. In the context of the music streaming market the decision makes little sense. However, in the context of the increasingly autonomous and green car market it starts to become a little easier to imagine where Tesla might go.
With its electric vehicles, Tesla is able to promise that less maintenance will be required by virtue of the fact that its cars have fewer working parts. With the chances of things going wrong decreasing, the time between purchase of a new vehicle for Tesla owners is likely to be greater than it would be for a standard car.
This means that once someone becomes a Tesla customer and makes that initial high-cost purchase, Tesla doesn't make much more money from them for a number of years.
Of course, Tesla has maintenance plans (opens in new tab) for its cars which could bring around $2000 to $3000 per customer every four years.
However, though this is a significant sum for an individual, from a company perspective it’s not a huge amount of money; once everyone that wants to buy a Tesla has purchased one, the company could find the income from these maintenance plans just isn’t enough.
In light of this, it’s not surprising that Tesla would want to diversify its revenue stream. Already the company has started charging a fee (opens in new tab) for use of its Super Chargers when they were once freely available.
To justify an increase in price for its maintenance plans or create a more robust charging package, Tesla could potentially bundle in an in-car Tesla-owned entertainment service.
Or it could offer the service for a completely separate monthly or annual subscription fee. Naturally people will want to buy new cars because they want a new car and values decline, not just because the one they have has broken down.
A good subscription service not only adds value to the purchase of a Tesla, it's a positive and negative incentive to remain in the Tesla ecosystem rather than move over to another brand of electric car when you're on the market again.
When changing your car brand involves cancelling services and possibly dropping their benefits altogether it becomes much less appealing.
It could also be possible that Tesla is looking even further forward to its planned fleet of self-driving cars with these plans.
Further down the road
If Tesla manages to create its own self-driving taxi service (opens in new tab), it’s very possible that in order to retain frequent customers it could offer a monthly subscription option which would see ride access bundled in with an in-car entertainment package you wouldn’t get with any other taxi service.
Considering we know how forward-thinking Elon Musk is and the rate at which self-driving technology is being pushed to advance, it wouldn’t be entirely surprising that Musk would be laying the groundwork to bring these ideas to life already. This is, of course, all conjecture at this point but it's likely that the way we buy and own cars is going to change in the future.
We’ve already written about how the nature of ownership is being changed by a seeming move towards the purchase of services rather than individual goods.
More than ever, we’re looking to subscribe to long term services rather than make one-off purchases.
Cars are still by far one of the biggest one-off purchases we still make but it’s possible that that could soon change.
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