Advances in electronic technologies have transformed the automobile by increasing safety, reliability and convenience for the American consumer. Despite these advances, which include all electric vehicles like the ones from Tesla (TSLA) and developments on assisted driving technologies from Google GOOGL +0.57%, Mobileye (MBLY), Volkswagen AG (VLKAY) and others, the drivers of new car demand have remained intact. The average consumer still wants a quality car, one that does not cost too much to get to destinations and one that has entertainment choices including the AM/FM car radio.
Technological advances have been numerous and have aided in optimizing vehicle performance, navigation, entertainment and safety. The carburetor has been replaced by an electronic fuel injection system. Rather than breaking down on the side of the road, computers now constantly monitor modern cars for possible malfunctions. Even the paper map has been replaced by directional GPS. Getting lost is now a thing of the past. AT&T T +0.4% and other mobile carriers have even started to bring high-speed wireless connectivity into the car.
Arguably, no consumer facing change has been as radical than those found in the entertainment system in the car — the radio unit. Dozens of different bells and whistles to the basic AM/FM dial have been added since the late 1960s. Eight-track tapes have morphed into cassette decks, which were eventually abandoned in favor of CD players. Those CD players are now disappearing as consumers prefer Sirius XM Holdings (SIRI) satellite radio and integration with their Apple AAPL +0.19% iPhone, Android powered smartphone or in some cases a Blackberry (BBRY) smartphone as the preferred way to listen to music, talk radio, podcasts and even books while driving.
Despite the technological advances that are making the car a digital hub on wheels, the consumer’s love affair with AM/FM radio remains. The numbers of radio listeners are staggering. More Americans listen to AM/FM radio each week than use Facebook. Nearly 60% of the population listens to the radio on a daily basis and nearly 85% of the American people report listening to the radio at least once a week.
The ongoing reasons for America’s love affair with the radio stations in their cars varies. Some listen to AM/FM radio for the music. With so many listeners, even as different mediums and technology have changed the landscape, getting a song played on terrestrial radio is the quickest and surest way to stardom. For those looking to sell products, the sheer size of the audience makes radio advertising one of the most effective ways to market goods and services. And for local news and information, there is nothing like broadcast radio. It’s not like satellite radio will provide you with a local weather forecast.
A new poll by the firm IPSOS confirms that while some consumers are demanding changes to the car’s infotainment system, consumers want AM and FM radio to remain the heart and soul of their car entertainment. When 1,000 adults were sampled and asked about their car audio preferences, 91% said they desire typical car radio with 9% preferring an app-based system. Per the data, 84% of respondents listen to AM/FM radio while relatively new systems like Sirius/XM, Pandora and Spotify came in at 22%, 18% and 7%, respectively. Finally, when asked about their preferences for entertainment options in their next car, 80% of consumers chose AM/FM over CD players, connected smartphones and other forms of audio entertainment.
Despite America’s love affair with terrestrial radio, salesmen of the latest modern equipment and authors who fancy themselves as the next Isaac Asimov suggest its time for automobile manufacturers are considering replacing the AM/FM radio in your car with an app-driven system that would remove the consumer’s ability to get local terrestrial radio in their car. Based on heavily sampled consumer preferences, the data suggests this would be a grave mistake.
When contemplating their infotainment roadmap, automobile manufactures like General Motors GM +0.64%, Ford (F), and others should factor these findings and preferences into their decision making process. Automobiles tend to get better and better with each new model year, but despite many of the changes and advancements under the hood some things remain popular. People like reliability, durability and an enjoyable experience while driving, but they also prefer their AM/FM car radio. Efforts to remove AM/FM radio from the automobile falls squarely into the “if it ain’t broke don’t fix it” category. That should be good news for Cumulus Media CMLS +0.45%, Saga Communications SGA -0.15%, and Entercom Communications (ETM) and other radio broadcasters.
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