Reports that electric car maker Tesla is in talks with the major record labels about creating its own streaming service led to a lot of raised eyebrows Thursday, with many wondering: Why would billionaire Tesla founder Elon Musik want to venture into music?
According to a story in Recode, Tesla’s service may come with multiple tiers, including a Pandora-like personalized radio proposition. Tesla already has a deal with Spotify for some of its markets, and also streams programming from TuneIn and on-demand music via Slacker on its in-car dashboard. So why not just double down on one of these existing partnerships, or strike a new deal with Apple?
The reason for Tesla’s music ambitions could be a bigger strategy to move towards a dual revenue stream that includes service and subscription fees in addition to the significant upfront costs for one of the company’s cars. This could include in-car entertainment, which may feature a Tesla-branded music service, and work a bit like Amazon Prime — pay a monthly or yearly membership fee, and get access to streaming music and a number of other perks.
Paying your car company once a month may sound like a terrible idea, especially if you already shelled out six figures for your luxury electric car, but Tesla has already begun to explore additional revenue streams, especially as it moves to sell larger numbers of more affordable sedans. The company initially offered the use of its Super Chargers free of charge, but introduced per-minute charging fees earlier this year.
It’s conceivable that Tesla could offer a charging-plus-music package for a monthly fee — but Musk may be already thinking further. As the technology for autonomous driving progresses, Tesla may one day operate a fleet of autonomous cars, and sell mobility, media and other perks as part of the same monthly bill. And as all of the car makers move towards electric and self-driving vehicles, Tesla may be looking to generate profits not primarily with car sales, but memberships and other fees.
In that light, it’s actually be a smart move for Tesla to start conversations with labels now.