Baby, you can drive my iPod
When it comes to the car stereo, Apple wants to stay in the driver's seat.
SAN FRANCISCO (Business 2.0) - What were the most expensive iPod accessories on display at this week's Macworld Expo?
They had to be the half-dozen cars parked in a corner of the cavernous Moscone Center, each plugged into one of Apple's tiny music players.
Less than two years after introducing its first partnership with an automaker (see "Apple at the Wheel" timeline at right), Apple (Research) has made iPod integration the hottest new car option for 2006.
With Sunday's announcement that Chrysler (Research), Dodge, and Jeep vehicles will feature iPod connectors, 16 auto brands now offer accessories that let you plug your iPod into your car's audio system.
Apple estimates that 40 percent of cars sold in the U.S. this year will offer iPod integration.
Some iPod-ready autos put iPod-like playback controls right on the steering wheel or instrument panel, with the built-in stereo displaying the name of the current track.
Acura plans to let drivers command an iPod through a voice-recognition system. Simpler accessories offered by automakers broadcast the iPod's audio signal to a car's FM radio.
The "iPod tax"
For automakers, this seamless integration comes at a cost. Apple exerts tight control over accessories for its music player through its "Made for iPod" licensing program. Dashboard integration with the iPod requires the ability to plug into the iPod's special dock connector -- and that, in turn, requires a license from Apple.
"Made for iPod" may be quite lucrative for Apple, with accessory makers reportedly paying 10 percent of the wholesale price of their wares for a license. Some observers have dubbed the license charge an "iPod tax." Apple has said that the license helps reassure accessory makers that the technical specs of the iPod dock won't change, rendering their products obsolete. In any event, Steve Jobs & co. could end up with a considerable revenue stream: Phil Magney, principal analyst at Telematics Research Group, estimates that 400,000 iPod-specific car audio accessories were sold in 2005 -- worth between $750 million and $1.5 billion at wholesale -- and he expects the market to grow to 6.8 million units by 2010.
How does Steve Jobs manage to have such influence over the proud auto chieftains of Detroit, Stuttgart, and Tokyo?
First of all, there's the runaway success of the iPod, with 42 million sold to date and 14 million sold in just the past three months. Sheer numbers have made the iPod a must-have auto accessory, and the iPod tax a small price to pay.
Telematics Research Group forecasts that by 2011, 28 million autos in the U.S. and 73 million autos worldwide will have iPod integration, up from just under a million last year.
"iPod integration is still a cool feature," says Brian Moody, Road Test editor at Edmunds.com. "It's not yet expected." In three to five years, he says, it might become standard.
In the meantime, he expects most automakers will introduce audio-input jacks that let drivers plug any sort of MP3 player into the car stereo. (Audio inputs, while compatible with any player, don't let drivers use steering-wheel controls to control music playback or volume, or see the current track on the stereo display.)
For those looking to hook up an older car or a 2006 model that doesn't yet have an iPod kit, there are a host of third-party options.
The simplest include FM broadcasters and cassette adapters, which feed the iPod's audio output to the car stereo. The most advanced include displays for playing downloaded iPod videos, with inputs for multiple high-tech devices -- satellite and HD radio and DVD players as well as for the iPod. Alpine, Clarion, and Pioneer are some of the biggest firms in the iPod-auto accessory business.
For more on the $700 million market for iPod accessories, click here.