The New Media Hub? Your Car
By Andrew Tilin

(Business 2.0) – Imagine if the entertainment system in your car rivaled the setup in your house. Inside the vehicle's cozy confines, you'd have 500 channels of TV, high-speed Internet access, MP3s that stream off your car's hard drive, and live traffic feeds to warn you of snarls. The demand for "car convergence" is revving up, and companies from Comcast to Microsoft to satellite-radio providers Sirius and XM are staking hundreds of millions of dollars on the idea that cars are morphing into four-wheel multimedia centers.

The transformation is well under way. This month, car-stereo maker Alpine Electronics will release the $299 Vehicle Hub, a mobile infotainment device that not only links up with satellite radios and iPods--displaying the music player's text on a dashboard screen--but also lets passengers simultaneously watch two separate movies and, soon, different television channels. "Content will be coming from everywhere," says Stephen Witt, an Alpine vice president. "The key issue is, How can we make it easy to manage in a moving car?"

That's not a rhetorical question. By 2020, some 9 million cars are expected to be sold each year with broadband access. By then, according to GartnerG2, consumers could spend an estimated $7 billion annually for satellite navigation hardware, rear-seat entertainment systems, and the like. While cable and satellite providers stand to profit the most, the convergence onslaught will also create a slew of business opportunities for smaller players that can offer better data compression, voice-recognition software to let drivers safely interact with the Web, and even Internet portals and video content designed especially for automobiles.

Nearly 12 percent of new cars already have screens for viewing DVDs or data, and Alpine thinks that number will swell to 50 percent in just five years. Later this year, Vienna, Va., upstart RaySat will release an antenna capable of delivering both Internet access and satellite TV to automobiles. "People spend a lot of time in their cars," says Phil Magney, principal analyst at Telematics Research Group, which follows the mobile wireless industry. "They might as well enjoy it."

That's the goal of XM's NavTraffic, a navigation system that becomes widely available this spring. The service--similar to popular offerings in Europe and Japan--feeds real-time traffic data to an XM subscriber's global positioning system for $3.99 a month. Unlike conventional GPS offerings, NavTraffic warns drivers of traffic jams ahead and suggests alternative routes. Sirius has promised a similar product later this year, and in January it partnered with Microsoft to license Windows Media software, which will give Sirius data-compression technology to deliver satellite video to cars, possibly by mid-2006. "Providing digital media to kids in the backseat is central to our vision," says Mike Coleman, a Windows product manager.

But Sirius may soon find itself competing with Comcast. Earlier this year, the cable-TV giant began working with mobile-electronics firm Delphi on a video service that could be ready in 2006. In one scenario, Comcast programming would be sent to a subscriber's home PC and then downloaded via Wi-Fi to a Delphi in-car hard drive, making it impervious to signal-blocking tunnels or canyons. Analysts think the time it takes to hammer out the technology will only make drivers hungrier to sign up. "I always hear, 'Consumers won't spend more money for an in-car service,'" Magney says. "But if the value is there, drivers will come up with the cash." After all, nobody wants to miss American Idol just because they're inside a car and not in front of the TV. -- ANDREW TILIN

Who's Driving the Convergence Trend

Sources: Listed companies