Tesla. One of the most lucrative car manufacturers. Music. One of the most lucrative internet businesses. In the last 20 years, we have seen innovation and competition driving change and options for consumers. We had Napster, iTunes, iPod, Pandora, Spotify, YouTube, Apple Music and more coming up to compete about one of the most enjoyable factors in our life. Combine the two industries and you get Tesla Music, the most lucrative car internet business. Or something like that 😀
Tesla is holding talks with all of the major music labels about licensing a proprietary music service and creating its own proprietary music-streaming service that would be sold with every Tesla. Every Tesla sold comes with a huge tablet/touchscreen and broadband internet connectivity so it would be very easy to integrate such a service. As a matter of fact, Teslas or in general cars are the fourth screen after our TV, laptop and mobile phone.
It makes sense, doesn’t it? When we are very young we listen to music through our phones but after we buy our car, we probably spend 90 minutes every day commuting and listening to music. And that might be the longest time that most of the people listen to music every day.
Obviously, the immediate question is why wouldn’t Tesla work with the existing music services such as Apple Music (27 million paying subscribers), YouTube, Pandora and Spotify (50 million paying subscribers). These music streaming services have already invested billions into building their service and customer base and their customers have also invested time and money to select their favorite music and create their playlists. Moving to Tesla Music, a new music service is somewhere between hard and very painful. Perhaps so painful that people would actually prefer to avoid it and try to find other solutions.
What every startup founder and business owner will tell you when it comes to the most important advice, FOCUS is usually one of the most frequent advice. And focus for Tesla would be to actually get down to producing and delivering more cars. And they actually need to do that very bad with the upcoming Model 3 that has 400,000 preorders and must start delivering these to their owners in 2017.
This is the kind of service that it takes more than one person to do it and probably won’t be profitable anytime soon. It would take a team to work on this and at some point, even Elon Musk himself might have to be involved. Taking the time, energy and focus from a man that runs some of the most important and biggest startups and projects is a very expensive bet that comes at the expense of the existing and potential revenue from the already huge business.
Elon Musk must focus on delivering more cars faster than delivering more cars with a different (not even better!) music service.
The Tesla Music service development will definitely be expensive and at the end of the day, it will not add any significant revenue for Tesla and probably won’t even make up for the cost of it.
On the other hand, adding any of the existing music services and working on a revenue share model and let’s say take 15% of every month’s revenue would be easy, extremely cheap and even more important convenient for the customers.
Music services have good profit margins and very small costs to run.
It is not obvious why a car maker would want to create a music service and how it can be more competitive than any other solution, how it can provide better value to the consumers and to the business.