IHS Knowledge Nugget – November Issue Consumer Survey – Apps in the Car

Colin Bird

Radio is the original “infotainment” platform. Radio, more specifically music, is the leading entertainment application in the car. As display audio systems with multiple wireless and wired connection protocols for brought-in devices become more popular in the car, a proliferation of native apps and smartphone integration solutions are allowing new avenues for content. In the United States one content producer has capitalized on this disruption better than the rest: Pandora.

Pandora Media Inc. has grown tremendously since launching in 2000 and today accounts for 9.3% of all the radio listening hours in the US, surpassing satellite radio’s 7.9% share, as of July 2015, according to Triton Digital, Radio Advertising Bureau (RAB), and the US Census Bureau. For perspective, 91.2% of persons 18 years and older listen to the radio, and of those 60% of that is in the car, according to RAB.

According to the IHS consumer behavior study published in March of 2015, Internet streaming radio was the fourth most often selected option by US consumers for listening to music in the car.

 AM/FM Radio: 74%  CD player: 64%  Satellite radio: 43%  Music stored on mobile device: 41%  Internet streaming radio: 23.7%  HD Radio: 21.9%

Base: 1004 US new car intenders, Source: IHS, Inc.

Pandora is one of the most prevalent apps in the car, at least in the US. Of those who stream internet radio in the car, more than a third say they use Pandora while driving.

Which internet radio/audio app do you use most often?

Base: 230 US respondents who subscribe to an online music service, Source: IHS, Inc.

While smaller than other groups, internet streaming radio users are heavy users once hooked, with 79% of those using it telling IHS they use it always or frequently.

How often do you listen to internet radio in your vehicle?

Base: 230 US respondents who subscribe to an online music service, Source: IHS, Inc.

Pandora realized earlier on that in order for the company to grow it needed exposure in the car. While the automotive industry continues to debate on what be the eminent method for smartphone connectivity in the vehicle, Pandora hasn't waited. Instead, the company has implemented a wide range of solutions. Currently, most native app integration relies on CE-, where the native app requires a brought-in device for its data connection. Some automakers offer connectivity through a built-in modem solution. Other’s offer app launchers, and more recently, Apple CarPlay, and MirrorLink have offered mirroring solutions.

Pandora’s automotive protocol has been implemented on nearly all of these systems in OEM head-units and on aftermarket devices. Some example methods to bring Pandora into the car include the following.

 GM: Chevrolet MyLink; Buick/GMC IntelliLink; Cadillac CUE (smartphone)  BMW: Models equipped with option 6NR "BMW Apps" (smartphone)  Mini: Models equipped with Connected Interface (smartphone)  Ford: Vehicles equipped with AppLink (smartphone)  Mercedes-Benz: Vehicles with Media Interface Plus (smartphone)  : Pioneer systems from model year 2012 or higher (smartphone)  /: Toyota Entune, Lexus Enform (smartphone)  Volvo: Sensus Connect Play (embedded)

Pandora says its service is integrated (one way or another) in nearly 200 vehicle models, and 270 aftermarket devices. The company has over 12 million unique active users through native automotive integration, up from 9 million last year, which Pandora reported to Automotive News.

Pandora has also been really good at monetizing its automotive platform. The company rolled out an in-car advertising solution in 2014. The solution allows advertisers to reach those utilizing the native in-vehicle Pandora solution with either 15- or 30-second audio spots. Companies like Ford, State Farm and Taco Bell have utilized this solution, according to Pandora.

Pandora doesn’t break out its native automotive users in its financials. The company brought in $230.9 million in advertising revenue in the second fiscal quarter of 2015. The company also brought in $54.6 million in revenue in the same fiscal quarter from its subscription plan, Pandora One. Overall the company says it has 79.4 million active subscribers.

Conclusion

Pandora has had a really good start in the automotive space. The company has the scale and capital to invest in development of multiple different integration solutions in the car, something that other players, like Rdio, cannot do. Spotifiy is newer to the US and hasn’t made the same types of investments into native automotive applications. iHeartRadio, while well integrated in automotive applications, isn’t a well-known brand.

Pandora is in a good position today, however this could change quickly. Smartphone projection platforms, such as Android Auto and Apple CarPlay, will bring a wider variety of competition by allowing smaller players to invest very little in integrating into these wider platforms across many vehicle and head-unit platforms. Furthermore, players like Apple may view Pandora’s dominate position in the car as a threat (possibly explaining why Pandora isn’t yet available on CarPlay). With Google and Apple investing heavily into their streaming platforms, the competition may take its toll on Pandora’s dominance and impact the company’s business model in the not-too-distant future.