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And you thought the iPod was everywhere already. Now the digital music player is more likely to end up in the car revving next to yours—or your own.
On Aug. 3, Apple (AAPL) announced that America's largest car manufacturers, Ford (F) and General Motors (GM), as well as Japan's Mazda, will include iPod connections on most 2007 models. Apple already had similar arrangements with more than a dozen automakers, including Honda, Volkswagen, and Mercedes-Benz.
The newest deal means iPods could be integrated into stereo systems of more than 70% of the 2007 autos sold in the U.S., and it could help Apple extend its lead over rivals in the $4.5 billion market for digital music players. A lot of users listen to iPods on public transportation, but this arrangement means more will bring the player when they're behind the wheel, says American Technology Research analyst Shaw Wu. "The most important thing is it increases the ubiquity of the device," Wu says. "This is something a lot of consumers have wanted, and I think it gives them another place where users can enjoy their iPod experience and it increases the stickiness of the device."
IPOD ON BOARD. Apple, which has sold 58 million iPods, now has 75% of the U.S. portable player market. Samsung, Sony (SNE), Creative Technology (CREAF), and Toshiba largely split the remainder. Microsoft (MSFT) plans to join the MP3 fray close to yearend, but the software giant will have a bigger impact on the smaller outfits than on Apple, says Wu.
Currently, most MP3 players connect to vehicles via tape-deck or FM radio adapters. The devices are relatively cheap, ranging from $20 to $90, but are often difficult to operate while driving and can distort sound quality. But the iPod jacks, situated in glove compartments, let drivers easily operate players with existing stereo controls and charge a device's battery without an additional adapter.
The jacks will come standard on roughly half of the 2007 Ford, Lincoln, and Mercury models. On cars where it's optional, the jack will cost $150 to $200, depending on the manufacturer. The iPod, not included, ranges from $69 to about $400. "It is becoming to a certain extent an option just like power windows," says Chris Whitmore, an analyst at Deutsche Bank (DB). He says the jacks may be a standard feature in all cars "three or four years down the road."
LOOK OUT, SATELLITE. The easier it is to play the iPod in a car, the more pressure Apple could place on satellite radio providers Sirius (SIRI) and XM Satellite Radio (XMSR), analysts say. Both of those companies make portable devices that can be used in cars. "Apple is pushing further and deeper in its relationship with the automotive industry," says Rob Sanderson, also of American Technology Research. "An easy pathway to connect to cars is only going to dampen the demand for devices such as satellite radio." Sanderson is not recommending shares of Sirius and XM in part because of the threat posed by Apple and other media player makers, which don't have monthly service fees (see BusinessWeek.com, 12/28/05, "Satellite Radio: Now It's a Race").
Some automakers such as Ford also plan to offer built-in satellite radio devices as well as jacks for other media players and portable device starting this fall. However, there has not been a similar clamor for compatibility features with other portable media players. As a result, automakers have focused on the iPod. "Recognizing that many customers desire the ability to add an iPod to their cars, we've teamed with Apple," says Tamara Mlynarczyk, a spokesperson for Mazda's North American Operations.
In a statement, Mike Jackson, GM's vice-president for marketing and advertising in North America, put it more succinctly still: "We understand that people want to use their iPod whenever and wherever they want."