Microsoft has announced that as of January 1, 2012, its Road Traffic Information (RTI) service, MSN Direct, will be discontinued. MSN Direct is an FM radio-based digital service which allows specially equipped portable devices to receive information from MSN Direct services in the US. Devices that support MSN Direct include PNDs and embedded navigation units. With these devices, subscribers gain access to road traffic information (RTI), as well as weather, gas prices, local events, stock quotes, new movie information and flight times.
MSN Direct’s business model faced challenges from the start
Two years ago when the PND market was in a strong growth phase and fuel prices were high, the MSN Direct product looked promising as it developed ties with US PND leader, Garmin, as well with aftermarket navigation system suppliers. With a price point of $129.95 for MSN Direct for the duration of the device (and recently reduced to $99.95), a compelling case for RTI and fuel services could have been made to consumers. When the price of the service is amortized over the product life (roughly 3 years) a consumer would only need to save about $0.83 a week in fuel to cover the price of the service. However, MSN Direct suffered greatly from being removed from point of sale of a navigation device. As an add-on service, MSN Direct had little control over how aggressively its service was sold to buyer of PNDs and aftermarket navigation at Big Box stores or even how well buyers were informed of the service.
Furthermore, most Americans tend to be quite comfortable receiving traffic updates from traditional media sources such as television and radio. To many, the perception of RTI quality does not merit paying for what can be attained through traditional media. To others, MSN Direct was simply not perceived as high-tech enough, as RTI technology has been evolving rapidly.
In Jul-09, Strategy Analytics spoke to representatives from MSN Direct who remained optimistic about the future of MSN Direct, stating, that by winter of 2009, the price of MSN Direct receiver chips will be the same price as RDS-TMC chips, or about $1 and that a further reduction in subscription price points should drive subscription. Strategy Analytics remained dubious about this possibility, especially as Navteq was grabbing for market share by offering free lifetime traffic updates on some Garmin devices and access to traffic information over mobile phones. This coupled with greater distribution of traffic information via cellular to smartphones appeared to sound a death knell for MSN Direct and other paid RTI services that provide the very highest quality RTI.
Not the end of Microsoft in RTI
The demise of MSN Direct does not mean Microsoft has exited the market on RTI, but instead simply has taken a breather. Microsoft Research laboratories have spent five years developing a complex software model called Clearflow. Clearflow is designed to help one determine if it is truly faster to detour when one is confronted with a traffic jam. According to U.S Microsoft, Clearflow will be integrated into Bing Mobile and other Microsoft mobile applications, including in-car navigation and personal navigation devices and Clearflow will be available at no cost. In addition, Microsoft beat Google out of the blocks in announcing real-time search with non-exclusive deals with both Facebook and Twitter. The demise of MSN Direct does not diminish the role of RTI, but rather reflects the evolution of the RTI, interlinked with navigation and location.
Clear business models will win the day
The implications of MSN Direct’s demise should signal to others such as Sirius XM Traffic that trying to establish a directly consumer funded TMC+ service in volume markets continues to be extremely difficult. Ad-funded models are also in the early stages of evolution. And while the lessons are less clear for TomTom and others offering truly premium traffic services, they should to take note of MSN Direct’s difficulties in overcoming RTI quality perception issues, establishing well targeted price points, and how to bundle, successfully, RTI with navigation. The future of 'standard' RTI services is when they become more fully integrated with turn by turn navigation and maps, and together, they start to be used to 'hook in' consumers for high end high quality RTI, and location based services and applications.
Strategy Analytics has profiled a wide range of RTI vendors in the forthcoming report 'Road Traffic Information: Competitive Positioning and Business Models', publication due Nov-09
Strategy Analytics has addressed the changing nature of the Location Value Chain in a Oct-09 webinar at: http://www.strategyanalytics.com/default.aspx?mod=ReportAbstractViewer&a0=5087
Strategy Analytics will be hosting a panel discussion on Road Traffic Information at TheWhereBusiness.com’s Navigation and Location conference on December 1-2 in San Jose, CA at: http://www.thewherebusiness.com/navusa/