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The Proposed Tesla Music Service Might Not Be What Everyone Thinks

Tesla MusicThe last few days has seen plenty of news copy about the rumor of new Tesla music streaming service, and, as usual with anything that has to do with Elon Musk, the hype builds on itself. Let me throw the cold waters of reality on this rumor. Even if it does come to pass, it might not be what everyone seems to think it will be.

First of all, the rumor came from a Recode post that stated that Tesla was in talks with the major music labels about bundling a proprietary music service for its cars. Tesla then further fueled the rumor by issuing a vague statement that didn’t deny that that the talks were happening, which brings us to where we are today.

Let’s look at this logically. It makes sense to enhance the Tesla auto experience with any kind of proprietary entertainment software, and a music streaming experience would certainly add to the overall glow of the product. That said, if you think for a second that someone would buy a car based its streaming service (which you don’t even get to try out beforehand to see if you like), then I know of a hi-tech Yugo that you might be interested in.

Launching a new music service is not a trivial pursuit, and while Elon Musk has made his living on taking on larger-than-life projects, they usually have the potential for a larger-than-life payoff. This is not the case with a music service, which operates on razor-thin margins and will end up being a loss-leader for those companies left after that part of the music industry shakes out (sorry Spotify, Deezer, Slacker, Tidal, et al – it will be a Google, Apple, Amazon, Tencent streaming world eventually).

Not only that, you can’t just have a streaming experience limited to the car. It has to be multi-platform so you it can be accessed away from the auto as well. Do you think that anyone really wants to use two separate music services with different interfaces and playlists? This factor alone just ratcheted up the complexity factor by a large margin.

So you might be thinking, “Okay, Elon’s a smart guy and used to taking on projects bigger and more complex than this. Tesla would be in the same position as Apple, Amazon and Google to be able to use the service as a loss-leader.” Maybe, but to what end? Tesla Music would still be limited in what it could charge under the same agreements with the major labels as the other streaming services. Some of the other services (Apple Music and Amazon, for instance) have huge leads in terms of users and marketing, and low priced products that make logical upsells to keep users in their ecosystems. What’s the upsell for Tesla? It’s a huge, almost insurmountable jump from a 10 buck a month streaming service into a $30,000+ automobile. How often do you think that will happen?

Now while all that sounds pretty negative, there are actually some bright spots in the Tesla streaming idea. Sirius XM is a popular option in cars as it bests radio for most users. How about a Tesla music service that’s a Sirius-killer? “But Tesla doesn’t have a satellite,” you say. Not yet, but SpaceX is scheduled to launch a network of 4,425 mid-earth orbit satellites in 2019 that would solve that problem and then some.

Could it be that Tesla is actually renegotiating the licenses of a company it will acquire? ¬†Slacker would fit nicely in this spot and provide the company everything that it needs to take on Sirius and then some (Pandora could have been a fit until Sirius XM’s recent investment). In the end, this streaming music rumor might actually have some legs, but the focus may just be in the wrong direction.

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