Chevron icon It indicates an expandable section or menu, or sometimes previous / next navigation options. HOMEPAGE

MORGAN STANLEY: Here's why it makes sense for Tesla to become the next big music-streaming service

FILE PHOTO - New Autopilot features are demonstrated in a Tesla Model S during a Tesla event in Palo Alto, California October 14, 2015. REUTERS/Beck Diefenbach
New Autopilot features are demonstrated in a Tesla Model S during a Tesla event in Palo Alto, California Thomson Reuters

Tesla, the electric-car and energy-storage company, could become the next big music-streaming service.

Advertisement

Last week, a representative told Business Insider that it was important for its customers to "listen to the music they want from whatever source they choose." The comments followed a report suggesting the company was working on a music-streaming service.

And according to Adam Jonas, an equity strategist at Morgan Stanley, this would make sense.

Silicon Valley is interested "in the potential multi-trillion dollar opportunity selling data, content, and experiences unfamiliar to today's auto firms," Jonas said in a note on Tuesday.

"The potential total addressable market of such a bundled mile (utility + content + data) dwarfs some of the major end markets (PC, smartphones) that Silicon Valley currently services."

Advertisement

By 2030, Jonas forecast, Tesla Mobility — an on-demand service similar to Uber — would have about 2 million cars, and there would be about 7 million privately owned Teslas.

"Tesla wants to be more than a 'dumb pipe'" that moves people around, Jonas said.

The auto industry would be a "money loser" by 2030, Jonas said. However, Tesla would be able to monetize the time that people are spending in their cars, as it and other companies develop what he described as a "living room on wheels."

"These firms could cede 100% of the value of content to the likes of Apple, Alphabet, Pandora, Sirius, or Netflix," Jonas said. "On the other hand, they could say: 'Wait a second. This is our venue. Our OLED screen. Our speakers. Our HMI. Our seats. Our software. Let's at least give the customer a choice of using our own apps before we too quickly go the way of the pure handset manufacturers.'"

Advertisement

Additionally, the buying power of people who own Tesla's electric cars could be well-suited to the market for paid premium content.

Jonas expects that Tesla's peers entering the self-driving and ride-hailing space, including Alphabet and Apple, could also explore original content for their cars' passengers.

But these competitors are bigger and better capitalized than Tesla, meaning they could provide ride-hailing services at a loss and at Tesla's expense, Jonas said.

Music streaming is worth about $50 million in enterprise value to Tesla, Jonas estimated.

Tesla
Advertisement
Close icon Two crossed lines that form an 'X'. It indicates a way to close an interaction, or dismiss a notification.

Jump to

  1. Main content
  2. Search
  3. Account