At a time when radio struggles with its role as the red-headed stepchild of the broadcast industry it was refreshing to discover a group of enthusiastic radio marketing executives discussing what the organizers of the event described as the arrival of the fourth golden age of radio. The discussion was occurring at the RAIN (Radio and Internet Newsletter) Summit in connection with the Radio Advertising Bureau event in Washington, DC., this week. Kurt Hanson, CEO of AccuRadio.com and Publisher of RAIN, defined the vision of the fourth golden age of radio as that period following the first (1935-55), second (1960-75 = Top 10, emergence of FM), and third (1976-99, listener fatigue, consolidation). Hanson pointed to Internet radio as a transformative force creating new value for radio advertising and content. For these executives, the hand-wringing regarding the impact (read: threat) of Internet radio is past, replaced by an intensifying embrace of a technology that is transforming the industry. Broadcasters left the event with the newfound conviction that Internet radio was a valuable tool for enhancing their influence and reinforcing their ties to listeners – and the mobile phone and the automobile are increasingly important venues via which to pursue that opportunity. For these broadcasters, the so-called fourth golden age of radio is characterized by the emergence of Internet radio and five aspects defined by the event organizer as: 1.                   Personalization and control manifested in pause, fast forward and thumbs up/thumbs down functionality; 2.                   Variety in the form of thousands of available stations targeted at all forms of regional and genre/sub-genre-based interest; 3.                   Lower spot load – ie. fewer ads – but better targeting of ads – and the corollary of more detailed and accurate metrics; 4.                   Ubiquity – Internet radio is accessible via televisions, mobile phones, standalone radios and, soon, automobiles; 5.                   Global/National reach vs. local – after all, listeners can be anywhere. Internet radio use currently stands at a 3.8% share of radio listening, according to data from Ando Media referenced at the event, representing the equivalent share of radio listening captured by FM radio in 1971. Arbitron data shows the percentage of online radio listening (% who have listened to online radio in the past week) as steady at 17% between 2009 and 2010 (equivalent to 43M listeners). Pandora, the most successful online music provider to date, showed an increase in # of listeners per average quarter hour (AQH) from 257K in January to 366K in July. At the same time the total AQH for the top 20 online radio sources was 780K and the total online radio listening figure was 1.3M. The numbers indicate that Pandora has a 28% share of all online radio listening, according to Hanson, and an overall radio listening market share of 1% - equivalent to 1% of listening in every market in the U.S. The trend, according to Pandora’s own data, continues upward with the number of hours of listening on Pandora growing from 200M in January to 275M in July. And the majority of the increase is coming from mobile users, who now account for more than half of those listening hours. Pandora’s overwhelming brand recognition in the space was reflected both in the listener data and in research presented by Coleman Insights which found Pandora, Slacker and iHeartRadio as the only brands with any significant unaided recognition. The larger message from the Coleman study was that Pandora may have strong recognition but does not yet have a dominant image in the minds of consumers – ie. the market is still fairly fragmented and an open opportunity. The implications for the automotive and mobile device markets come through loud and clear here and in Strategy Analytics’ own data where interest in and usage of Internet radio on mobile devices is on the rise. Not surprisingly, auto makers are seeking to capitalize including front runners BMW, Ford and Mercedes-Benz. Only a year ago, Internet radio in the car was greeted with skepticism and derision for a variety of reasons including: 1.                   Cost – As unlimited data plans begin to disappear, the perception is that Internet radio will become prohibitively expensive to mobile users; 2.                   Network capacity – Cell towers have limited ability to support an unlimited number of data users, which is what Internet radio users are; 3.                   User experience – Capacity and signal issues have created a listening environment carried by drop outs and lost signals. All of these objections have either been resolved or will soon be resolved: 1.                   Cost – Do the math. Taking AT&T’s tiered plan as an example, the $30 for 2.4GB likely represents MUCH more than enough time and bandwidth for all but the most out-of-control mobile listener. Cost is NOT an issue. 2.                   Network capacity – Carriers are adding smaller cells and Wi-Fi access points in major metro areas to alleviate the capacity issues. AT&T complaints have almost (I say “almost.”) completely stopped. 3.                   User experience – There will always be challenges in delivering music consistently, but the creators of these solutions are providing for caching and buffering at the receiving end while broadcasters are filtering content to lower-bandwidth alternatives at the broadcast end. The dominant mode of delivery for Internet radio in the car will be the smartphone in the short term. And with a growing population of smartphones in the marketplace, the opportunity is large and growing. But the concept of an embedded telematics infotainment system with access to Internet radio is no longer anathema in the industry. In fact, the Mercedes-Benz MyComand concept of such an embedded solution shown a year ago at Telematics Munich now looks not only doable but downright prescient. Some bumps in the road remain.  Music service-type Internet radio, such as Pandora and Slacker, will have a user experience advantage over true Internet radio platforms such as RadioTime and vTuner. Because of their personalized nature, Pandora and Slacker will have the advantage of leveraging buffering and caching to preserve the listening experience where cell connections are lost. (Slacker, of course, is primarily a caching-based service and, by definition, won’t lose connection mid-song.) Nevertheless, with carrier network improvements and the transition to LTE technology, the radio aggregators such as RadioTime and vTuner may gain the upperhand by facilitating access to a wider range of content with more creative means to manage and discover new music. RadioTime, for example, has deployed a song search feature able to locate a song being played on any of its participating radio stations. These aggregators also have the advantage of making podcasts and other non-radio content available while also integrating terrestrial sources such as analog AM/FM and HD Radio sources using location data. Competing Radio Platforms It is no coincidence that Sirius XM is making its content available via the Internet. Sirius XM clearly recognizes the competitive threat posed by Internet radio. To respond to the content searching and sorting functions of some Internet radio services and the ability to store or buffer some music, however temporarily, Sirius XM can be expected to bring content management enhancements to its Satellite Radio 2.0 platform due late in 2011. (Sirius XM has raised its subscriber guidance, forecasting 20.1M U.S. subscribers by the end of 2011.) Sirius XM already offers smartphone app functionality already widely deployed by Internet and terrestrial broadcasters. (In fact, much of the talk at RAB revolved around leveraging these apps for advertising and promotional engagement with the listener.) But with the enhancements in satellite radio requiring further hardware investments by OEMs, Sirius XM will have to continue to subsidize its OEM customers. HD Radio will continue to see widening deployment via automotive OEMs, especially since the required hardware investment is substantially less than for satellite radio. According to a recent Twice magazine report HD Radio is built into 5% of new cars sold in the U.S. reflecting deployment by 15 brands on 86 vehicle lines and as standard equipment on 36 car models. There are 2,085 converted stations and 1,226 multicast channels. More than  3M HD systems of all types have been shipped, according to iBiquity Digital, and efforts are underway to see HD Radio technology integrated in handsets. Conclusions The two challenges for OEMs will be to monetize the Internet radio opportunity and to solve the user interface challenge of accessing multiple radio sources safely in a vehicle. From a monetization standpoint, the goal will be to enable users to purchase songs and to enable access to premium content. In addition, the integration of Internet radio into embedded systems will make a powerful and positive contribution to the perceived value of telematics infotainment systems. Smartphone integration continues to advance and a variety of approaches will be tried, no single one of which is likely to dominate. As an example, BMW’s Mini Connect integration reproduces the smartphone display in the instrument cluster, while the solution in the 1 Series lets the driver use the smartphone’s interface. The latter approach is used by Mercedes in its Smart integration product. The bottom line is that Internet radio in the car is much closer to a reality than it appeared just 12 months ago, and it will likely contribute positively to convincing consumers to pay for telematics systems. http://bit.ly/c0OLhT - Consumer Implications for Smartphone-Vehicle Connectivity  - Chris Schreiner - Automotive Consumer Insights http://bit.ly/c1nvTq - Consumer Interest High for Connected Safety and Security Services - Chris Schreiner - Automotive Consumer Insights http://bit.ly/aGJHDj - Smartphone Market Evolution and the Automotive Opportunity Implications -Fitzgerald - Automotive Multimedia & Communications http://bit.ly/bD5RzL - Automotive DMB Digital Radio: Marketing Strategies an Increasing Priority - Blight - Automotive Multimedia & Communications

When IBM had the personal computer industry in a headlock, the company was able to freeze customers’ plans to purchase competing PCs by releasing fear, uncertainty and doubt (FUD) in the marketplace. It achieved this goal by announcing its own plans for new products 6-12 months in advance. Sirius XM used its earnings call earlier this month for the same purpose, announcing plans for Satellite Radio 2.0 for Q4 2011. The difference, of course, is that Sirius XM does not control the market for broadcast radio content. In fact, the company is facing competitive pressures from both terrestrial and Internet-based sources. Further diminishing the Satellite Radio 2.0 gambit, is the declining portion of Sirius XM’s revenue and unit volume coming from retail, aftermarket devices. (According to estimates from the Consumer Electronics Association, satellite radio sales to dealers fell to $64M in 2009, with declines forecasted through 2013.) Sirius XM executives stated in the Q2 earnings call plans for the launch of the XM 5 satellite in October and the launch of Sirius 6 in Q4 2011. Also due to arrive in Q4 2011 is the newly touted Satellite Radio 2.0. Sirius XM execs said that SR 2.0 will offer consumers greater capacity and more functionality – both enhancements are intended to stimulate average revenue per user (ARPU). These same execs noted that no additional satellite launches will occur for several years, setting the stage for improved cashflow and profitability. In addition to the satellite and service launches late next year, the Federal Communications Commission (FCC) limitations on Sirius XM subscriptions will end in August 2011. All of these indicators are positive for Sirius XM except for the fact that competition has intensified. With the FCC limitations removed, Sirius XM will have a much broader scope of subscription options given the 150+ range of stations to choose from. SR 2.0 promises even more ARPU upside with added channel content and, as Sirius XM execs clearly indicated in their earnings call, a wider use of data for telematics and other applications. It is interesting to hear Sirius XM getting excited about telematics as a potential ARPU contributor, and it is an indication that the company is moving in the right direction and recognizes the shortcomings of the existing service. It is also, no doubt, a response to competitive pressures from HD Radio and Internet radio. The question is whether or not this awakening at Sirius XM is coming too late to matter. HD Radio technology is proliferating as more OEMs adopt the technology and more radio stations join the burgeoning ranks of participating broadcasters. HD Radio is appealing since it operates over the same FM frequencies, though requiring some additional hardware, and it is free. At the same time, more and more OEMs are lining up music service solutions such as Pandora along with Internet radio - via smartphone connectivity in the short-term and embedded solutions in the long run. The success of Pandora is a testament to that company’s ability to deliver a solution that is able to integrate seamlessly with automotive systems. Competitor Slacker’s content-caching music service is not less compelling, but OEMs have not found integration to be nearly as simple. Still, the tide that is lifting Pandora's boat will likely benefit other music services and Internet radio providers, such as ClearChannel's IHeartRadio. The timing and manner of Sirius XM's announcement of Satellite Radio 2.0 suggests that Sirius XM is attempting to prevent OEM defections to HD Radio, music service solutions or Internet radio. OEMs are in the process of making decisions today that will impact vehicle platforms four and five years hence. Sirius XM executives refused to explain exactly what SR 2.0 will be. But given the short launch window, it will no doubt arrive in the retail aftermarket first. The company is currently briefing OEMs regarding its confidential plans. Sirius XM has already lost momentum in the automotive market. Car makers (and aftermarket system makers) have shifted toward offering satellite radio as an option rather than as a standard feature. And both Sirius XM and its OEM customers are using subscription conversion data to determine which cars should and should not be offered with the service. This means that even though Sirius XM has been able to show subscriber gains in its past two quarters, rapid growth is a thing of the past and pales by comparison to the subscriber numbers of a Pandora or Slacker. On the earnings call Sirius XM execs said that availability of satellite radio technology in cars was at approximately 60% of car models with a paid subscription conversion rate of 47%. The company currently claims more than 19.5M subscribers and anticipates somewhat more than 20M by the end of the year. OEMs say that if it weren’t for their multi-year agreements with Sirius XM they might have walked away from the relationship a long time ago. (Several OEMs are also shareholders in Sirius XM.) This sour sentiment does not bode well for Sirius XM moving away from the subsidy model it maintains in the automotive market. This subsidy model also means that the cost of acquiring new subscribers – given the decline of retail satellite radio sales – will continue to rise as the balance between retail and OEM sales continues to shift toward subsidized OEM subs. Further clouding the otherwise rosy long-term outlook for Sirius XM is the mandated switchover to XM. OEMs currently offering Sirius satellite radio service have been told they will have to switch to XM by 2016. The honeymoon for Sirius XM is clearly over. The question now is whether SR 2.0 can save the store. Satellite Radio 2.0 There are three areas where SR 2.0 could help Sirius XM hold onto its existing subscribers while attracting new subscribers. Here are Strategy Analytics’ thoughts on what SR 2.0 will look like: Audio – Sirius XM faces its biggest audio challenge from Internet radio and music services generally and Pandora in particular. All of these services are paid and Internet radio has suffered a blow from the onset of tiered data plans limiting the use of such services. Nevertheless, OEMs have embraced Internet radio because of the powerful consumer demand and awareness – several times the user base of satellite radio and widely and easily accessed on multiple platforms without any additional hardware. The only solution Sirius XM can offer is more or better-targeted audio channels. Ironically, the more channels Sirius XM adds the more difficult it is to use. Expect Sirius XM to update its content search and save capabilities to better replicate an Internet radio experience. Sirius XM can also be expected to enhance its iPhone and iPod integration with song-tagging not unlike HD Radio’s capabilities. Expect Sirius XM to add additional capabilities, along the lines of what iBiquity Digital has been showing in HD Radio demos for the past 2-3 years. Enhancements are likely to include more artist, track, album information; album art; song duration; maybe even reviews or other metadata from suppliers such as Gracenote or Rovi. Traffic – For some reason Sirius’ traffic data services are not comparable to offerings from direct competitors such as ClearChannel’s RDS-TMC. Side-by-side comparisons conducted by this analyst of both XM NavTraffic and the Sirius traffic service have found them to be lacking in comparison to both PND and embedded solutions. The only good news for Sirius is that RDS-TMC is only offered standard by half a dozen car makers. Still, with the proliferation of HD Radio technology, Sirius will soon be up against TPEG traffic data content, putting it further behind the eight ball. Sirius must bring its traffic data services up to a competitive grade. Strangely, the company does not even use the same flow and incident sourcing between its data (Traffic.com) and broadcast traffic services (Westwood One). Expect Sirius XM to do something about the shortcomings in its traffic reporting. OEMs are definitely making comparisons between HD Radio and satellite radio traffic services and making critical long-term decisions. Expect major traffic data improvements in SR 2.0 including the implementation of a standard traffic database system – such as Gewi’s TIC 3 – and/or TPEG traffic information services. Only time will tell if the changes will be enough or will occur soon enough to preserve strong OEM relationships. Even more ominous for Sirius XM is the fact that more and more OEMs are building the cost of traffic into the cost of their vehicles. The $3.99/month traffic subscription for Sirius XM traffic data will not survive this process of commoditization - especially if the data quality is not competitive. Data – Sirius XM’s Travel Link service, offered by Ford, is an impressive voice-driven offering of content such as gas pricing, ski conditions, news, weather, and sports. Expect Sirius XM to bring this offering up to speed with a greater variety of content delivered with improved graphics. The competition here comes mainly in the form of smartphone solutions, so the challenge to compete is steep. Can Sirius XM breathe life into its retail aftermarket position with SR 2.0? Can the company preserve its standing with OEMs, which are more concerned with reducing costs and complexity? For now, Sirius XM is on a path to continue to build its subscriber base, enhance its service and reduce its operating expenses. But the future of the company hinges on whether car makers will continue to tune in beyond 2016. Further insight: http://tinyurl.com/2bz9zq6 - Google, Nokia and New Entrant Positioning in Automotive Infotainment - Lanctot – Automotive Multimedia and Communications Service http://bit.ly/dniNxa - Navigation Heuristic Evaluation: Telmap5 – Schreiner – Automotive Consumer Insights http://bit.ly/95NCoW - Automotive DMB Digital Radio: Marketing Strategies an Increasing Priority – Blight – Automotive Multimedia and Communications Service http://bit.ly/dtRE5C - Automotive Telematics Services: Shifts in Pricing and Monetization Expected – Canali – Automotive Multimedia and Communications Service http://bit.ly/bwdwcW - Connected Vehicle and Vehicle Device Connectivity System Database by Feature, Region, and Price 2010 – Canali – Automotive Multimedia and Communications Service http://bit.ly/d0aLhq - Connected Vehicle Telematics: Car Maker Profiles – Canali – Aumotive Multimedia and Communications Service

The transition to digital radio has been slow, but no one should have any doubt about its inevitability. One of the greatest challenges in ushering digital radio into the market, aside from differing standards (in Europe) and analog radio shut off issues, is the user interface. Digital radio opens up a new world of location-relevant information including both data and content all of which means opportunity for system designers to compete and differentiate. Digital radio is forcing designers to change the way they think about broadcast content and how consumers will access and “discover” new sources and types of content – from traffic and weather information to podcasts and enhancements such as slideshow functionality and conditional access. While the fundamentals of frequencies (in the U.S.) and station names (Europe) remain unchanged, the ability to search for specific content or location information is transforming the radio experience. Digital radio is ideally suited to the emerging cloud-based content and service delivery world confronting the automotive industry. This convergence of radio and the cloud is manifested most obviously in so-called hybrid radio (promoted by RadioDNS www.radiodns.org) which brings together broadcast signals with online content enhancements such as album art. Of course, hybrid radio is still just an idea today, although broadcasters and content providers are building the necessary databases to support the technology. (Strategy Analytics data shows FM radio technology forecasted to be available on 60% of handsets sold in the U.S. by 2014.) Meanwhile, electronic programming guides – such as RadioTime – have already made search and location relevance a reality. The unspoken facilitating technology is the smartphone. The growing popularity of smartphones and the corresponding rise of automotive smartphone connectivity and application stores have facilitated the introduction of Internet radio and music services into cars. The integration of this access with on-board systems will add yet another layer of added value for the consumer. Even more significant is the emergence of interactivity and conditional access to radio content. The proliferation of music services is turning music consumption into a thumbs-up/thumbs-down proposition allowing consumers to customize their experience..Among the music services enabling this customized experience are Pandora (streaming), Slacker (cached), Mog, Rhapsody and Thumbplay. But unlike digital radio, none of these services are completely free for a commercial-free experience. Digital radio stands alone as a ubiquitous, free-over-the-air offering increasingly built into OEM and aftermarket solutions. Of greatest importance, from a user interface perspective, is the fact that the OEM can control, leverage or drive the digital radio experience, unlike Internet radio, which is connectivity based. The march toward digital radio was manifest at last week’s WorldDMB conference in the form of software defined radios capable of supporting DAB, DAB+, DMB and HD Radio systems. Companies showing such solutions included ST Microelectronics, Maxim and EtherWaves. Frontier Silicon laid claim to market leadership in digital radio implementations in its comments at the event. Frontier made a distinction between higher cost software defined radio solutions that provide for flexibility and upgradability and hardware radios that are lower cost and less flexible, while offering a third path of hybrid radio (not to be confused with the RadioDNS technology) offering an optimal mix of lower cost and flexibility. Panasonic Electronic Devices also showed multiple-format modules at the conference. The overall tenor of the WorldDMB gathering was oriented toward overcoming transition issues for the implementation of digital radio throughout Europe. Of course, the industry can only progress as quickly as the systems can reach the market. Hardware and software companies are still scrambling to bring all of the capabilities of digital radio into being. This is most clear from the progress of iBiquity Digital in the U.S., key sponsor of HD Radio technology. This week the company reported that 18% of aftermarket systems sold in the U.S. this year came with HD Radio. The company also reports steady progress in recruiting OEMs to implement HD Radio, which is increasingly standard. But none of the implementations currently on the market are able to take advantage of the complete range of available digital radio applications. So, the content is available in the form of hundreds of broadcasters and the receivers are in place in line-fit and aftermarket solutions, but complete technology deployment is still in progress at the silicon level. Nevertheless, governmental authorities are aggressively pursuing awareness campaigns and contests intended to drive digital radio adoption. The numbers are still modest, typically in the hundreds of thousands of units, but at least these representatives recognize that digital radio will require active efforts to stimulate consumer interest. At the same time, new capabilities will mean new business models and new user interfaces. One of the essential reasons for the introduction of digital radio is to open up congested airwaves to more broadcasters and more broadcast content. This will stimulate additional advertising and revenue opportunities and confusion. But these are early days for digital radio. The inevitability of digital radio was clear at the WorldDMB conference where country rollout status reports were shared including some hard digital switchover dates, such as the U.K.’s 2015 deadline. (France was notable by its absence at the event - due to logistical issues. But France’s mandate for DMB leaves no room for doubt regarding its transition to digital radio.) Whether or not digital radio replaces analog radio over the long run, the automotive industry is in the forefront of the movement and stands to reap the greatest rewards. It remains to be seen which OEMs or suppliers will lead the way but the race is on to deliver a new level of value to consumers. Further insight: http://bit.ly/8Z8HZh - Automotive Connectivity: Beyond Bluetooth Solutions - Automtive Multimedia Communications - Mark Fitzgerald http://bit.ly/b5W8ZS - Nokia and RIM Push Into Automotive as 'Apps' Competition Mounts - Automotive Multimedia & Communications - Joanne Blight http://bit.ly/blAHUC - Handset Sales by Type: Smartphone, Feature Phone and Basic Phone - Wireless Device Strategies - Alex Spektor http://bit.ly/9jANwu - Global Smartphone Sales Forecast by Country Western Europe and North America - Wireless Smartphone Strategies - Thomas Kang

The cardiac kids at Sirius XM are at it again. After surviving years of multi-million dollar losses, a high-wire, company-saving merger with XM, and the downturn in auto sales, the company reported a strong first quarter in May. With auto sales recovering at the beginning of the year, Sirius was able to report revenue and subscriber increases and later revised its estimate of subscriber additions for the year to approximately 750,000. But now the ultimate test, the switch to XM, is on. The subscriber increase, which pushed the total close to 19M, reflected a net gain of 171,441 vs. a decline of 404,422 in the year-ago period. The numbers looked good, but they obscured the challenges arising from an increasingly competitive radio-listening landscape, the increasing inclination of car makers to make satellite radio an option rather than standard equipment and the impending termination of the Sirius half of the combined Sirius XM satellite network. All of these negatives were either swept from the table by the positive earnings report or were not mentioned at all on the earnings conference call. (In the interest of full disclosure allow me to acknowledge that I am a subscriber to both XM and Sirius services and enjoy the content, as do the members of my family. Each member of my family has his or her favorite stations and it is nice to know that those stations are available anywhere in the U.S.) Strategy Analytics consumer surveys in the U.S. show satellite radio lagging well behind traditional AM/FM as a must have in the car. While AM/FM is described as a must have by 88% of respondents, satellite radio is regarded as a must have by only 14%. Internet radio lags even further behind at 5% - but that is changing. Interestingly, U.K. survey respondents show a higher level of interest in digital radio (DAB or DMB), with 22% describing it as a must have in the car. The lack of enthusiasm for satellite radio reflected in the survey results is just one of several negative indicators. Another such indicator is the fact that the aftermarket for satellite radio products is almost non-existent. Just as car makers have been inclined to make satellite radio optional, makers of aftermarket head units have also tended to introduce systems that are “satellite ready” vs. offering one or the other system built in. And the market for portable devices enabled for satellite radio has been limited thus far. Sirius XM is line extending into the iPhone app marketplace, but here, again, the company will run up against music services and Internet radio. The music services leverage more liberal licensing models for storing and managing music and Internet radio will benefit from the increasing proliferation of programming guides such as Stitcher or RadioTime to access interesting and relevant local content including podcasts. Of course, these services also benefit greatly from having a two-way link. Millions of consumers are turning to music services and Internet radio. Car and handset makers are developing ways to integrate these music services (ie. Slacker, Pandora) and Internet radio (ie. IHeartRadio) into their platforms – while carriers are scrambling to introduce tiered data programs to shield themselves from the burgeoning traffic. While satellite radio is increasingly optional either from the factory or in the aftermarket, HD Radio is increasingly standard equipment on cars. But the real killer for Sirius is unfolding in recent meetings with OEMs. Sirius has told its clients, which include BMW, Mercedes, Chrysler, Ford, Kia, Land Rover, Jaguar and many others, that they must switch to XM by 2016. For the car makers that helped make Sirius XM what it is today, there are no special subsidies, no silver bullet hardware fix or retrofit. There is simply a notification that they must switch from Sirius to XM by 2016. The bottom line, of course, is that the two satellite systems – one based on a satellite in geosynchronous orbit and one on satellites in geostationary orbits and using similar frequencies – require different receivers and antennas. In spite of a legal requirement in the merger agreement that the companies find a solution for interoperability, nothing beyond a combination of the two incompatible receivers and antennas was ever introduced in the market. The quiet announcement of the switch to XM, though long anticipated, is surprising for a number of reasons: 1. The companies must have known this day would come when they originally merged, yet it was never acknowledged until recently that one of the satellite networks would have to be sacrificed. 2. Given the fact that subscriber growth has reached a plateau it is clear that Sirius XM can ill afford to lose half its subscribers. And winning new subscribers in the current competitive environment will be a challenge especially as auto sales – the source of the majority of new subscribers – continue to move sideways, failing to provide the engine satellite radio so desperately needs. 3. Car makers – including several premium marks - are incensed that Sirius is making this unilateral change with little or nothing in the way of guidelines or even a public information campaign strategy. Sirius has made no public statement yet and company representatives have failed to respond to repeated requests for comment. 4. There is also some irony in the fact that Sirius spent many years denegrating XM's solution but in the end has chosen to consolidate on the XM platform. Long term, the good news is that the company selected to preserve XM, the more robust of the two solutions. XM was first to market with data solutions for weather (XM Weather in August 2003), traffic (XM NavTraffic on 2005 Acura RL and XM NavWeather on the Acura TL. Sirius made up some ground with the launch of Travel Link by Ford, but XM’s platform, including its terrestrial repeater network, is better suited to providing a wider range of content and services to drivers. If Sirius can keep car makers on board with a vision of low-cost, nationwide content delivery – and the higher ARPU implied therein – it may emerge profitably and competitively vis-à-vis smartphone and digital radio-based solutions. But the company is changing gears just as these new solutions are gaining momentum and at a time when car makers have little patience for another high-wire act. Further Insight: CES 2010: The Arrival of Converged Automotive Multimedia Products - John Canali -  http://bit.ly/9gq4yo Automotive Bluetooth: Profile Strategy Key to Infotainment Success - Mark Fitzgerald - http://bit.ly/9qEXbU Internet Radio: Ready for Prime Time - Mark Fitzgerald - http://bit.ly/ZBXzd Internet Radio to Vie with Music Services for Automotive Dominance - Lanctot - blog - http://bit.ly/9xm6qR WorldDMB Car Manufacturers Workshop - Munich - July 7 - Arrange meeting with Strategy Analytics - http://bit.ly/aUcqgm

While major media and cable companies talk about four screen strategies the telematics industry is abuzz over the emergence of a three screen world. This was never more clear than at last week’s Telematics Update event in Novi, Mich. From OEMs to tier ones, software and service providers, the focus is on leveraging handsets, head units and the Internet to create closer and more profitable customer relationships. Companies on hand preaching the three-screen gospel included Nokia, Continental, Airbiquity, WirelessCar, RealVNC, QNX, Google, ATX, Tweddle Group Technologies and Parrot. The solutions demonstrated and debated point the way to a more connected experience in the car where the customer can access vehicle related information from outside the vehicle or on a phone or online when away from the vehicle. Even meta data provider Rovi and HMI supplier TAT offered their contributions to the three-screen vision. Nokia described and defended its terminal mode technology, a European-oriented campaign built around what some term a “screen scrape” transfer of a smartphone’s display along with a shift of device control to the vehicle HMI. Nokia intends to equip all of its smartphones with terminal mode technology by early 2011 and is working through the CE4A coalition to coordinate tier one head unit implementation of the technology throughout Europe, where Nokia’s market share is strongest. Using similar technology, RealVNC showed development tools for extending terminal mode technology into a wider range of devices and markets. While Nokia claimed to have two competing handset makers interested in the terminal mode solution, RealVNC’s more agnostic approach offers a suitable alternative. Airbiquity promoted its in-band modem technology by extending the platform to include a customized user interface, tied to the user’s mobile phone, along with app store functionality and location and user-relevant advertising messages. Airbiquity is increasingly taking on the role of a content aggregator, tying together content and applications in a single user interface. Airbiquity's Bluetooth-based approach was presented as a powerful and low-cost data-over-voice/packet alternative to packet-only solutions which require a payment for dial-up networking or SPP monthly service fees. Airbiquity estimates that OEMs deploying packet-only solutions will limit themselves to 20% of the penetratable market of which only 3-5% will have extra carrier service plan for BT DUN/SPP packet connectivity. On top of the data-over-voice solution, Airbiquity is layering its Choreo cloud service for both consumer and commercial markets. Airbiquity says Choreo allows OEMs to convert the car to an IT platform, creating a global infrastructure for content and service delivery. WirelessCar has also stepped into the content aggregator role, showing a clever vehicle-to-smartphone integration providing some basic vehicle control functionality and information access. The WirelessCar solution suggested the long-anticipated realization of a vehicle portal also accessible via smartphone for sharing vital vehicle data with the owner. OnStar has found this approach, with key vehicle status information, to be a valuable tool for driving customer traffic and service revenue via the dealer channel. To drive home its message, WirelessCar led a panel discussion with Ericsson and Cybercom, representing the wireless carrier and software integration perspectives on the implementation of a three-screen world.  Actually, WirelessCar has been pushing and demonstrating this concept for at least three years. Tweddle Group Technologies – the combination of Tweddle Group with UIEvolution’s former automotive division – is also looking to fill the content aggregator role. The company brings to the table its long history in the owner’s manual business – which itself is transitioning to electronic delivery – along with a relationship with Pandora. The Tweddle solution, which allows for the delivery of text and video content - via head unit or handset - related to vehicle systems has intriguing possibilities if integrated with CAN inputs such as alerts or other status messages. Tweddle has yet to marry these two sources of data, but the concept is certainly a powerful one. QNX has also envisioned sharing vehicle status information with the driver via on-board displays. The QNX LTE Car demo includes a “Virtual Mechanic” for providing the driver with images of vehicle systems and their status. Given Toyota’s recent disastrous recalls, the opportunity for these types of systems to catch on is strong. For its part ATX was demonstrating its new application for integration with Mercedes Benz’s TeleAid telematics service. The app provides for some basic vehicle control along with the ability to remotely send a destination to the vehicle’s navigation system. Continental’s AutolinQ concept may be a little ahead of its time in promising an on-board app store experience in an Android operating system environment. While car makers and suppliers have broadly embraced a variety of Linux distributions, Android is still running up against some industry prejudice over the issue of vulnerability to hacking and other perceived weaknesses. Industry buzz suggests that Android is being accepted and even specified in some RFQs, which is certainly a promising development for Continental. The growing Android momentum in the automotive, mobile and even consumer electronics markets suggests that Continental is on the right track. In support of its campaign, Continental announced an eco-system of solution providers contributing to the platform including Ygomi, Inrix, Navteq, Navigon and Deutsche Telekom. Continental will no doubt be flexible regarding these relationships if it means sacrificing a partner to obtain a new contract. But at least now the Continental vision has been clarified as a fully evolved proposition. Delphi executives attended the event, but did not demonstrate their own connectivity platform: D-Connect. Delphi has been vocal in its support of connectivity to Android devices, but resistance to building Android into the head unit. Since D-Connect has not been publicly announced it is hard to predict how Delphi’s final implementation will arrive in the market. Tier two Parrot showed chipsets optimized for mobile device connectivity including the latest Bluetooth protocols and Wi-Fi. Android also figures prominently in Parrot’s plans including some active programs, according to the company. Google announced additional “Send to” partners at the event – OnStar and Ford. For Google, the message for the industry is that it is a cloud-based world. Applications are no longer launched for desktop computers, they are launched on and for the Internet. Google’s recommendation is clearly that car makers facilitate cloud connections either on board or via mobile devices. OnStar, with the most powerful brand in the telematics industry, faces perhaps the greatest challenge in developing a cloud-oriented strategy. Not only must the company integrate its infotainment and telematics teams – long at odds over key applications such as Bluetooth connectivity and navigation – it must also reposition a brand identified almost entirely in relation to safety and security, not entertainment. The path is far from clear, but the promise of additional revenue from dealer service work to content consumption and, overall, a tighter relationship with the customer has car makers and their suppliers working overtime. All agree, at last, that the future lies in three screens. Leading the way are OnStar and Ford, each of which has defined its own three-screen strategy. BMW and Daimler are the next logical candidates to implement the handset-head unit-Internet approach. All of which points to common elements in future telematics solutions including: app stores (accessible via all three screens), vehicle control (across and between platforms), access to vehicle status information (all screens), content aggregation partner and back-end system provider, cloud-based content and services, and provision for multiple-handset compatibility. The emergence of these common threads are helping to clarify the future deployment of telematics systems speeding the delivery of in-vehicle connectivity. *Editor's note: Airbiquity executives suggested amending the strategy to FOUR screens. This week, Microsoft's embedded software division touted a FIVE screen strategy at the Fachkongress Elektronik in Ludwigsburg. Further insight: http://bit.ly/cMw4f1 - Solid Q4 for PNDs, but ‘Free’ Navigation is Shaking Up Monetisation - John Canali – Automotive Multimedia and Communication Service http://bit.ly/bMeg36 - Global Mobile Handset Navigation Forecast 2004-2014 - Nitesh Patel – Navigation and Location Opportunities http://bit.ly/8Yo4U6 - Nokia & Google Shake Up $3.8 B Handset Navigation Market - Nitesh Patel – Navigation and Location Opportunities http://bit.ly/6FC6W7 - Smartphone Market Developments Shaking Up Automotive Strategies - Lanctot - Automotive Multimedia and Communications

Just as companies such as Delphi, Nokia and Apple are enabling in-vehicle HMI control of smartphone applications, Ford Motor Company is turning interface implementation up a notch with its new Sync AppLink, which will allow voice control of Android and BlackBerry smartphone apps. Sync AppLink will be available as a downloadable software program on the 2011 Fiesta, due later this year. The launch will test the limits of in-vehicle HMI technology for enabling safe access to social networking applications. Reading text messages or emails and responding with predetermined messages has already been enabled in Ford vehicles, but demonstrations of OpenBeak, which allows steering wheel controls to scroll through Twitter messages, suggest a more potentially distracting proposition though safer than using the mobile device's own voice controls or touchscreen. First demonstrated at the Consumer Electronics Show in January of this year, AppLink will enable voice control of the Pandora music service, Stitcher Internet radio content manager and Orangatame’s OpenBeak Twitter interface. Ford is simultaneously launching its Mobile Application Developer Network (www.syncmyride.com/developer) for enabling the development of Sync-enabled applications. Ford says it will introduce AppLink on all Sync-equipped vehicles next year, as well as provide interoperability with the iPhone and other smartphones. The company also says updated versions of each app, incorporating the Sync application programming interface (API), will be available through Android Market and BlackBerry App World for customers to download. Ford’s delivery platform, therefore, includes both its own syncmyride.com Website and the handset maker app stores. Ford says that as Sync-enabled versions of existing apps are released into the app stores, users will be prompted to download the latest version upon connection. Ford’s strategy clearly indicates that the company will handle the certification of application for use with Sync even if it is not the creator of all of the applications. While Ford’s 2M vehicle addressable user population is the largest in the automotive industry, the launch of developer support will be the ultimate test of Ford’s ability to attract third parties to its platform. Ford says interested developers can submit innovative ideas, and sign up for the latest information and news about the Sync application programming interface (API) and software development kit (SDK). The package will allow developers to modify existing applications and create all-new apps that can successfully interface with Sync. Ford says it is completing beta-testing on the SDK. Once beta-testing is complete, a broader release of the development tools is planned for later this year. The company says one of its development partners created a Sync-enabled version of its app just three days after receiving the development tools. Conspicuously missing from the Ford announcement is a provision for safe operation or more limited use of a smartphone in a vehicle. The recent CTIA show in Las Vegas highlighted a range of applications intended to restrict or modify smartphone usage in a moving vehicle. Ford may want to consider fast-tracking one of these applications in deference to concerns expressed in Washington. Ford has embraced the anti-distracted driving messages emanating from the National Highway Traffic Safety Administration. Ford’s 911 Assist application actually received an early endorsement from the National Emergency Number Association (NENA). But whether this new applications will be blessed by government safety authorities remains to be seen. According to a report in USNews, NHTSA director Ray LaHood contacted Ford CEO Alan Mulally directly to have a particular ad removed, which depicted what appeared to be a distracted driver using Ford's Sync (http://bit.ly/aTbVvv). Ford complied with the request, but USNEWS says LaHood is still opposed to the Ford Sync solution. Additional Insight: Nokia and RIM Push Into Automotive as 'Apps' Competition Mounts

http://bit.ly/cJ6dDF - #Ford’s Bite of the #Apple Shows One Path to Automotive #AppStore Success - Lanctot - blog - Strategy Analytics http://bit.ly/b9oVAt - CTIA 2010: Distraction Mitigating Apps on Display - Schreiner - Strategy Analytics

SYNC sells. Ford’s SYNC connectivity and infotainment system, built on the Microsoft Windows Embedded Automotive software platform, has reached the 2 million unit sales mark 10 months after Ford delivered its 1-millionth SYNC-equipped vehicle in 2009, the first SYNC systems were delivered in fall 2007. SYNC’s evolution is paralleling the consumer’s evolution in a connected world. Ford’s latest version of SYNC that debuted at CES 2010 presented a solution dubbed MyFord Touch, which truly shows the convergence of consumer electronics and the automobile. As consumers interact with the web and media devices with more regularity each year, Ford seeks to help the consumers replicate this behavior in the car. Examples include:

• Consumers have apps stores for their smartphone; Ford opened a market for car apps.
• Consumers have come to value internet radio, twitter, and social networking sites; Ford has worked with Pandora, Twitter, and Stitcher to make automotive applications.
• Consumers have become accustomed to being able to record and rewind live TV, Ford had come up with a solution where Sirius XM can be recorded and played back.
• Consumers are used to 5 way controls popular on iPods and numerous other consumer devices; Ford has employed similar technologies in its HMI.
• Consumers often look up driving directions while in front of a computer, SYNC users can now send MapQuest directions to their cars and the SYNC system will navigate the driver to their destination.
• Consumers like shopping at iTunes, users can now tag songs for purchase through HD Radio and the SYNC system.

SYNC adds value to vehicles. Ford data analysis indicates that SYNC-equipped models of the 2008 Focus are worth more than those without SYNC. After one year in service, the SYNC-equipped models sell for a $240 premium on average. This premium over a non-SYNC-equipped vehicle indicates consumer demand for SYNC is real. Ford has delivered the message to consumers that SYNC is a desirable product that makes the in-vehicle experience better and is worth a premium price. The upgrades to SYNC for the 2010 model year including the addition of MyFord Touch, Pandora, Twitter and Stitcher apps, iTunes tagging, mobile Wi-Fi hotspot capability, MapQuest directions and other features and applications indicate that Ford intends to protect its lead in the connected infotainment market despite competition from most every other vehicle OEM developing or offering competing solutions. http://media.ford.com/article_display.cfm?article_id=32262

When is Internet radio not Internet radio? When it’s a music service or programming guide. That’s one of many problems with Internet radio, nobody seems to understand what it is, which means marketing messages are confused and confusing. But the market leaders are finding success in spite of themselves with music service Pandora boasting a subscriber base of 45M; competing service provider Slacker claiming 15M; and programming guide supplier RadioTime reporting 40M listening sessions/month and rising. Pandora has captured the imagination of car makers and the creators of automotive infotainment systems. Both Ford and QNX have announced plans to bring Pandora to in-vehicle solutions. Nearly everyone in the automotive industry considers Pandora to be so-called Internet radio. Even Pandora calls itself Internet radio, but, in fact, it is a music service, not unlike Napster and Rhapsody or even iTunes. Note that no one would normally refer to Napster, Rhapsody or iTunes as Internet radio services – yet they perform many of the same functions of Pandora. The point is important to understand because there is a battle for the ears of listeners “trapped” in their cars. Today, these ears have more choices than ever before including traditional AM and FM, satellite radio, digital radio, recorded content (disc-based and digital) and streaming content from music services, podcasts, and, yes, Internet radio. And Internet radio is presenting an emerging challenge to music service providers. With vehicle connectivity being enabled via broadband and narrowband technology embedded or carried-in, consumers have access to virtually the entire conceivable spectrum of live and recorded content. The newest arrival, following Pandora’s debut, is RadioTime, an Internet radio programming guide. RadioTime arrives on the scene just as engineers and programmers are facing the monumental challenge to enable access to these services and their content. The objective is to organize and manage that content in an intuitive manner that can be easily and attractively communicated to consumers. The challenges are formidable. Slacker, a music service that competes with Pandora, claims millions of songs for a library 5x the size of Pandora’s and based on direct relationships with the “labels” responsible for the music. Slacker’s content is packaged in 120 genre stations and 10,000 artist stations. Both Slacker and Pandora have their own strategies for packaging their music offerings, with Pandora’s based on the increasingly ubiquitous thumbs up/down approach in contrast to Slacker's stations. And neither of these companies possess the licenses necessary to operate outside the United States and Canada - even Pandora is not available in Canada. This is where RadioTime comes in. RadioTime, the Internet radio programming guide selected by BMW for its Mini integration, provides access to 65K Internet radio stations from around the world. And the access to those stations is global, which helps to explain BMW/Mini’s choice. For in-vehicle delivery of these new music experiences the first steps are apparent in the latest iterations of Microsoft Auto which provide for song look up by voice regardless of source. QNX has also shown Internet radio integrations though generally focusing on Pandora – a lead that has been followed by Tier One suppliers (and QNX customers) such as Visteon, Continental and Denso, all showing their Pandora solutions at recent trade events. The importance of BMW/Mini’s RadioTime announcement revolves around the fact that RadioTime is a programming guide for Internet radio and is NOT a music service. RadioTime offers one of the first radio programming guides, focused as it is on Internet radio, yet it also includes non-Internet radio sources such as traditional FM and digital radio. RadioTime’s competitors include Reciva and vTuner, which have comparable offerings on a much smaller scale and lack regular FM or digital broadcast content. The only element missing from the RadioTime proposition is the personalization capability that distinguishes Pandora, Stitcher and others (ie. the thumbs up/down aspect). But RadioTime does uniquely offer localized content with local stations broadcasting audio and text in the local language. It is still early days in the Internet radio and music service business as far as automotive and mobile app implementations are concerned but there are already dozens of mobile applications available for nearly every mobile platform. For music services the business model revolves around subscriptions, paid downloads and advertising. The business models range from free (often with advertising) to paid (without advertising) and include sales of music and other access privileges such as caching or "skipping" songs. The major music services are Slacker, Pandora, Rhapsody, Spotify, iTunes and Napster. The major programming guides are RadioTimes, Reciva, vTuner and Radio Locator. The available Internet radio stations include: iHeartradio, RadioParadise and a host of individual and bundled stations ultimately encompassing the entire 65K stations available worldwide. Mobile radio apps include Flycast, Stitcher, Radiolicious, and WunderRadio amidst a long and growing list. Most listeners enjoy these services over their personal computers or televisions but a growing population are accessing content via mobile devices and, soon, will be plugging into Internet music sources via embedded systems. For now, though, car makers are preferring to maintain an arms-length relationship with these services by enabling access via a customer’s own phone and data plan. To achieve this requires either streaming Bluetooth connectivity via A2DP access or a hardwired connection. Slacker stands out in this crowd as offering a third path of storing content for later play instead of streaming, not unlike some of the portable satellite radio devices currently available. Slacker can be streamed or cached, giving it a unique advantage in the market. Despite this unique position, though, Slacker has yet to garner any visible design wins in the automotive market, though it is available on most popular smartphones. Ultimately, the market will favor low-cost Internet radio and music service solutions. This means that the battle today is between content aggregators such as RadioTime, Flycast, Stitcher, vTuner and Reciva and their ability to compete or co-exist with music service providers. Whatever the outcome, drivers with smartphone applications stand to benefit handsomely. For additional insight see: CES 2010: The Arrival of Converged Automotive Multimedia Products - John Canali -  http://bit.ly/9gq4yo Automotive Bluetooth: Profile Strategy Key to Infotainment Success - Mark Fitzgerald - http://bit.ly/9qEXbU Internet Radio: Ready for Prime Time - Mark Fitzgerald - http://bit.ly/ZBXzd

It is very strange indeed to find Toyota at the focal point of a vehicle recall imbroglio after years of immaculate quality ratings and at the peak of its global market share. But the strangeness of the timing is even more severe than that, because it was Toyota’s Prius that was used by QNX and Alcatel-Lucent to promote their “ng connect” LTE Car initiative late last year. The Toyota Prius became the mascot for the ng connect program, popping up in Detroit, Los Angeles, New York, Washington, D.C., and Las Vegas, in fact anywhere cars or automotive technology were on display. The purpose of the ng connect tour was to spread the word about the onset of 4G LTE technology and what it will mean for connected cars. Of course, the tour was also a showcase for QNX’s vision of both on-board and connected applications. Chief among the roster of on-board applications was a so-called Virtual Mechanic. The virtual mechanic is intended to provide live in-vehicle status reports on a wide range of vehicle systems including brakes, transmission, fuel, etc. with text and graphics. QNX is already the enabling software behind OnStar which, like Ford’s Vehicle Health Report feature, provide drivers with emailed status reports. The difference with virtual mechanic is that the information is live and delivered inside the vehicle. For QNX, the virtual mechanic was merely a concept shown in the context of a wide range of other concepts including in-vehicle displays of remote traffic cameras, access to Internet radio (Pandora), and a host of other location-aware and entertainment oriented applications. But the plot thickens with the emergence of Toyota’s recall nightmare because QNX is a supplier to both GM and Toyota. The virtual mechanic concept appears to belong to QNX, but the possibility for GM or Toyota to adapt the technology for their own marketing and customer relations purposes changes the prospects for this technology considerably. The question now is which manufacturer, Toyota or GM, will be first to enable a virtual mechanic-type application in the car. Or could some other QNX customer leap to the front of the queue: BMW, Peugeot, Mercedes Benz, Chrysler, Hyundai? Any one of these companies can look at Toyota’s difficult situation and realize they could be the next car company with software-laden cars producing unexplained, and seemingly unfixable, failures. A challenge for both Toyota and GM in implementing QNX's virtual mechanic will be the limited number of cars both companies sell with full-screen navigation sufficient to graphically display on-board systems. But LCD attach rates are improving for all OEMs in all segments and this application is yet another justification for large display fitment. Suffice it to say that the virtual mechanic is a concept that has arrived just in time to offer a way forward for a damaged auto maker and possibly for the entire industry. Whether QNX’s customers view this prospect from the same perspective remains to be seen. A final note: In this analyst’s opinion, the virtual mechanic will also make a great customer demonstration for car dealers. Source:  Strategy Analytics