Music Streaming Challenges Dominance of In-Vehicle Radio

According to Nielsen, radio reaches 92 percent of Americans over 18 years of age every week. Whereas Netflix and other streaming services have loosened over-the-air TV’s grip on the viewing audience, AM/FM stations still dominate in vehicles. But that might change since the coronavirus has kept millions of Americans from commuting — and listening to radio — while stuck at home. U.S. drivers, who listen to 100 minutes of radio every day on average, are worth $67 in radio industry revenue annually, according to Deloitte.

The Wall Street Journal reports that Deloitte compares that to the U.K.’s $25 in annual radio industry revenue and $2 in China. Now, music streaming services are looking to unseat AM/FM radio as the dominant entertainment platform in vehicles.

Spotify, for example, introduced Your Daily Drive, with “a mixture of curated music and news content,” but WSJ notes that, “to encourage drivers to switch, Spotify needs to offer more of the local traffic, weather and news updates that listeners usually turn to radio for.” Spotify hired radio veteran Kevin Weatherly to achieve the “right mix.”

Apple Car Play is also “available in many newer Ford, Bentley and Buick models, while Uber riders have been able to stream music from their Spotify account during their car trips since 2014.”

But, it adds, the streaming services have “little to show” for their years of attempting to be a force in vehicle entertainment, and Deloitte reported that, “between 2014 and 2018, the number of daily radio minutes listened to by adults aged 18 years or over in the U.S. fell by a modest 2 percent a year on average.” Nielsen’s data for 2019 revealed that, “the pace of decline in time spent listening to radio picked up slightly to 3 percent compared with a year earlier,” a pace that could increase as “more high-tech cars roll off assembly lines.”

IHS Markit data shows that, “the average vehicle on U.S. roads was 12 years old in 2019,” but, as Americans buy new cars, “music streaming in the car will become more seamless.” The advent of 5G will also improve connectivity, and unlimited data will also encourage the switch to streaming.

WSJ reports that, “some new electric cars, including certain Tesla models, don’t even have an option to play AM radio stations as the vehicles’ electronics interfere with the frequency.” Although, “for now, cost-conscious listeners opt for free radio to conserve their smartphone data … over 60 million Americans had a music-streaming account in 2019, equivalent to a quarter of the population over the age of 18.” That means that “Spotify would only have to sign up 3 percent of those that don’t already have an account to grow its U.S. subscriber base by one-fifth.”

It notes, however, that the biggest winners might be “recording giants Universal Music Group, Sony Music Entertainment and Warner Music Group,” since Apple and Spotify would have to pay “more than half of any new in-car streaming revenue to the record labels in the form of royalties for playing their songs,” unlike terrestrial radio stations that pay no royalties.