Although sheet metal and engine performance continue to be the mainstays of what Detroit does, the digital age is giving the 100-year-old auto industry a new way to sell to customers and to increase by an order of magnitude the number of contacts with them.
In June, with the backing of some very large corporate investors that include Ford Motor Co. and DaimlerChrysler AG, Sirius Satellite Radio will launch the first of three satellites to deploy a nationwide digital radio network with 100 channels.
By first quarter of 2001, satellite radios will be available as after-market products for autos from most of the major electronics manufacturers including Panasonic, Clarion, Kenwood, and Alpine. Later in 2001 Ford, DaimlerChrysler, Mercedes-Benz, BMW, Jaguar, Volvo, and Mazda will incorporate a Sirius radio receiver into their product lines. After-market receivers are expected to sell for $US300 to $US600.
Many of the automakers also will leverage Sirius' partnership with ATX Technologies to integrate two-way cellular communications within the satellite receiver. The ATX component is at the heart of a growing in-vehicle e-commerce initiative from all the automakers. Using ATX, satellite-radio listeners will be able to push a "buy" button to order CDs, books, and other products Sirius intends to promote on its radio channels.
A similar satellite radio effort is under way from XM, a General Motors subsidiary. Most GM cars, however, use the OnStar for two-way communications.
Telematics, two-way communications between the driver and the automaker, gives manufacturers a CRM (customer relationship management) play, said Garry Wallace, executive director at ATX, in San Antonio, Texas.
"This gives you the ability to touch the customer even once a day," Wallace said.
The two applications drivers want most are dynamic route assistance for navigation and real-time traffic reports.
ATX already offers both services to Mercedes Benz, Lincoln, Jaguar, and Infinity/Nissan owners. The company will migrate to interactive voice recognition next year.
For example, users signing up for the in-vehicle service fill out a profile that includes morning commute route. If a traffic problem occurs on that route, users are contacted in their car and offered alternate routes.
ATX is signing up 10,000 driver per month, Wallace said, and currently has 100,000 customers.
It is all about delivering the content that users -- in this case, drivers -- want, said Wallace. ATX and Sirius become content aggregators, similar to other online e-commerce sites. Content might include restaurant information or, depending on the user initiated profile, sales in stores a driver might be passing while en route to a destination.
The channels from Sirius will include 50 commercial-free music stations and 50 talk channels for sports, finance, and even cooking for a subscription fee of $9.95 a month. The talk channels will include commercials, albeit 20 percent fewer than the amount heard on typical broadcast radio programming according to a source familiar with the project.
The GM XM deployment will introduce its own 100 channels.
The impact on the radio broadcast industry of what essentially becomes a form of cable radio is unclear. But one Bear Stearns analyst believes it will not take market share from traditional radio stations.
"If it takes off it will take some share from radio but radio is local advertising. This platform is a nationwide platform," said Vijay Jayant, a managing director at Bear Stearns, in New York.
"It increase the pie for radio in general," Jayant said.
With 200 million cars on the road now and 16 million new cars added every year, the market for an e-commerce platform in cars appears to be very large, according to Terrence Sweeney, vice president of marketing at Sirius.
"If we get 1 percent we'll make money," Sweeney said.
Sirius is already contemplating ways to sell upgrades of its services by offering tiers of service not unlike cable television stations, Sweeney said.
Users might be willing to pay an additional $US1 per month for the Howard Stern channel or for 10 additional music channels, Sweeney said.