Net neutrality for cars: BMW's Apple CarPlay subscription could open Pandora's box

January 26, 2018

Jeff Haas commutes to downtown Denver each morning from suburban Englewood, Colorado. The first thing he does? He plugs his Apple iPhone into his 2018 BMW 340i’s USB port. The central screen on the dashboard switches from BMW’s proprietary iDrive software to a page of icons familiar to any Apple user.

Jeff didn’t choose his BMW based on CarPlay alone, but he willingly paid $300 extra for the feature, on top of an extra-cost option package required to access CarPlay.

MORE: Toyota debuts Apple CarPlay integration in 2019 Avalon

If he trades it in on a new 2019 model, Haas will have to pay BMW $80 a month for the right to use it after the first year.

BMW announced in January that it will charge an annual fee for CarPlay access on future models. Most automakers that offer CarPlay and Android Auto include it for free with their infotainment systems, or charge a more modest one-time fee.

BMW is alone among major automakers in having a line-item charge for Apple CarPlay, although Mercedes-Benz groups the connectivity with Android Auto for $350 on some of its models.

There’s yet another expensive hurdle. To order CarPlay compatibility, Haas had to first add a $2,900 Premium Package that included a built-in navigation system, among other features, to his 340i, so it’s not exactly an easy-to-access option.

2018 BMW 3-Series

2018 BMW 3-Series

CarPlay as a profit-maker

BMW believes CarPlay isn’t a feature drivers need to have on a standard equipment list. They also see it as a profit stream.

BMW’s technology product manager, Don Smith, told The Verge that the automaker views CarPlay as a convenience not every driver will want.

“This allows the customer to switch devices,” he said. “A lot of people buy [CarPlay] and think it’s okay, but sometimes they stop using it or switch to Android.”

BMW will treat CarPlay as an additional revenue stream the way that Tesla offers users access to its AutoPilot active-safety gear, says IHS Markit analyst Collin Bird.

“Software-based services like this are very lucrative to automakers because the margins are much higher [than they are for car sales on their own],” Bird said.

Tesla installs all of the hardware and software needed for the AutoPilot suite of collision-avoidance tech on every new Model S it builds. It charges less for the features if they’re ordered on a brand new Model S, but owners can pay extra to have the features activated at a later date.

CarPlay represents a level playing field, however. Only a handful of new cars aren’t CarPlay-compatible, and the integration differs only slightly between brands.

The net neutrality argument

Making CarPlay into a subscription-based service that’s installed, but not activated, on a vehicle, thrusts open the door to the automotive equivalent of net neutrality.

It takes something the buyer “owned” and turns it into a subscriber-only perk.

What if BMW started charging a monthly fee for traction control? Or for rear-seat side airbags? It might be cheaper to build all its cars with the same configuration and to toggle them on and off, based on the driver’s monthly budget for “add-ons.”

“Charging $80 a year is pure profit, as opposed to [other services] that have variable and fixed costs,” Bird said, drawing comparisons to General Motors’ OnStar concierge safety service and SiriusXM satellite radio.

BMW drivers may not notice much of a difference, though. As Bird points out, BMW has a significantly higher lease rate than mainstream brands.

“The majority of their customers shouldn’t even notice” the difference between a $300 initial charge and $80 a year over the three- or four-year lease, Bird said.

And it’s not Apple levying the charge for the CarPlay software and the Made for iPhone hardware compatibility program, which the software giant provides for free to automakers to install in their vehicles. For Apple, it’s a perk that might sell more iPhones. For carmakers, it’s a feature that might sell more cars. Any per-unit cost is typically baked into an upgraded infotainment screen, rather than as a line-item option.

Apple does gain access to a stream of user information, big data it can use to sell other services and to fuel its own product development.

Automakers do the same for app integration for services like Pandora and Spotify, which feature a paywall for more advanced functions.

That’s in marked contrast to, say, a SiriusXM satellite radio subscription. Automakers install antennas and then customers can activate a trial subscription subsidized by SiriusXM. After that point, it’s up to SiriusXM to retain vehicle owners. Even with the proliferation of streaming music apps, SiriusXM counts about 30 million active subscribers.

For BMW, it could be the beginning of a new way to make money off its cars worldwide, while it lets Apple siphon user data from its cars. Then again, it could simply be a way for some BMW shoppers to cross the brand off their list.

“BMW would have to make the experience premium in some way [to charge for a CarPlay subscription],” Haas said. “Maybe a tie-in with Apple, like discounts on their products.”

Next year, his commute might be in a different car.

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