Telematics and drive-time entertainment

Telematics and drive-time entertainment

Good old terrestrial radio had a simple business model: a radio in (almost) every car, with access to that radio only when there was a butt in the car seat. Though the technology is changing, drive-time is still a critical revenue-generator for radio and satellite radio stations.

The value proposition to advertisers is simple: The morning and afternoon weekday commutes deliver more listeners than other times, so they're the most valuable—and most expensive—to advertisers.

As streaming radio and radio on demand comes online, it's unlikely that radio providers—or anyone else—will be able to capture premium revenue from drive-time entertainment. Instead, says Praveen Chandrasekar, Frost & Sullivan's telematics and infotainment program manager, new-fangled radio revenue becomes a simple numbers game.

Driving time

"Driving time isn't increasing or decreasing dramatically," Chandrasekar points out. Some 200 million Americans still spend an average of 45 minutes a day on the road to and from work. So there's increasing competition among the new crop of services. Meanwhile, technical innovations, including real-time traffic reporting and advanced navigation systems, are actually reducing drive times.

For ad-supported apps, "If you want more ad revenue, you can't make people drive more."

So providers of entertainment apps need to spur more downloads, whether they are paid subscriptions or freebies, Chandrasekar says: "Internet radio depends on usage; the longer you let the app run, the more ads are flowing in. The more ads, the more clicks, the more money." (For more on Internet radio, see Telematics and the rise of in-car Internet radio, part I, Telematics and the rise of in-car Internet radio, part II and Livio Radio: How apps get into cars.)

That's exactly what National Public Radio is trying to do with its big push into automotive apps. NPR has a different business model than the SiriusXMs, Stitchers and Pandoras of the world do. Member stations get most of their support from listener contributions, followed by sponsorships from local companies.

"Our primary interest is continuing our mission of reaching out to new audiences," says NPR director of mobile Demian Perry. Half of NPR listening happens in the car, he says, but less and less of it is what the TV industry calls ‘appointment listening’—being sure to be tuned in to hear a show live.

While NPR has an, ahem, aging population of listeners who are comfortable with that, Perry says, "New audiences don't tolerate it; they expect to listen to whatever they want. There's a segment that would be shocked to know you have to wait three hours to hear what you want to hear." A growing portion of its audience listens to the shows as podcasts, for example.

Customization and sharing opportunities

For that segment, NPR has developed a mobile app that provides the customization and sharing opportunities that are hot. It lets people read and listen to the day's top stories from NPR News, make playlists and share favorites via SMS, social media or email. It's already placed its app into Ford Sync, and Perry says that his organization is in talks with most major OEMs. (For more on apps, see Industry insight: Telematics and apps.)

With the NPR News App for Ford Sync, the latest newscast automatically plays when you launch the app in your car, or you can choose to listen to it at any time. Drivers can listen to the stream of any member station and add favorites to the presets in the dashboard. Alternatively, listeners can use voice controls to request their favorite programs asynchronously. They can pause, skip or go back within and between stories.

"One of the big problems that the opportunity in cars has forced us to grapple with is the problem of continuous listening," Perry says. Once the program you selected is over, what should happen? Asking the driver to pick another program could be dangerously distracting. Instead, NPR is building a continuous listening algorithm that learns from each person's preferences in order to make better and better suggestions.

Continuous listening

NPR is building its own mobile platform from the ground up, taking advantage of Facebook's Open Graph, among other data sources, and using custom analytics to suggest programming based on an individual's own behavior, as well as the favorites of his or her friends and other people who are similar.

While app makers struggled to get in front of OEMs two years ago, the doors are wide open now, Perry says: "Most of the car companies are pretty interested in talking to us. They know we can be a valuable addition to figuring out what infotainment solutions will move cars."

That's all well and good for NPR, which doesn't need to maximize ad revenue, as well as for Ford and other automakers, which hope to make their cars more attractive with a fresh entertainment mix. But Frost's Chandrasekar seems some hurt ahead for both subscription-based Internet radio services and free, ad-supported services.

In short, there are too many and they're too much the same, while in-car advertising is too limited.

"Look at all of them,” Chandrasekar says. “They're all different versions of the radio. I don't know how many people can survive when they're pretty much offering you the same thing."

Susan Kuchinskas is a regular contributor to TU.

For more on Internet radio, see Industry insight: The connected car.

For the latest on Internet radio, visit Content & Apps for Automotive Europe 2013 on June 18-19 in Munich.

For all the latest telematics trends, check out Insurance Telematics Europe 2013 on May 7-8 in London, Data Business for Connected Vehicles Japan 2013 on May 15-16 in Tokyo, Telematics Detroit 2013 on June 5-6, Insurance Telematics USA 2013 on September 4-5 in Chicago, Telematics Russia 2013 on September 9-10 in Moscow, Telematics LATAM 2013 in September in Sao Paulo, Brazil, Telematics Japan 2013 on October 8-10 in Tokyo and Telematics Munich 2013 on November 11-12.

For exclusive telematics business analysis and insight, check out TU’s reports: In-Vehicle Smartphone Integration Report, Human Machine Interface Technologies and Smart Vehicle Technology: The Future of Insurance Telematics.

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