Here's on odd report for you: Electric-car maker Tesla (NASDAQ:TSLA) is allegedly considering launching its own music service. While a custom-built streaming music service could potentially enhance the customer experience for Tesla owners, would it be worth it?

Getting into the music business

Tesla has already talked with all of the major music labels about licensing its own music service, Recode said on Thursday, citing "music industry sources." The service would come bundled with its vehicles and possibly offer multiple tiers, according to Recode.

Tesla Model S steering wheel and touch display.

Image source: author.

Before Thursday, it was already clear that Tesla CEO Elon Musk was considering a unique music browsing experience for its vehicles. The CEO teased an improved music experience during the company's annual shareholder meeting earlier this month. He said Tesla would be updating its music player with a new algorithm so that owners could more easily find the music they want to hear. Is an entirely new music service what Musk was referring to?

Interestingly, instead of denying reports about talks with music labels, Tesla provided this comment to Recode on Thursday:

We believe it's important to have an exceptional in-car experience so our customers can listen to the music they want from whatever source they choose. Our goal is to simply achieve maximum happiness for our customers.

The comment not only suggests Tesla really is working on a streaming service, but it may provide a hint as to what the service may focus on. Given that Tesla says it wants customers to listen to their music "from whatever source they choose," could the service be one that's designed to integrate multiple streaming services into one?

Customer streaming music in a Tesla Model X.

Streaming music in a Tesla. Image source: Tesla.

Fiercely competitive

The streaming music service business -- currently dominated by Spotify, Pandora (NYSE:P), and tech giants like Apple (NASDAQ:AAPL)Alphabet (Google), and Amazon -- is fiercely competitive.

Pure-play streaming music companies Spotify and Pandora are both losing money. And their losses have widened recently. In addition, Spotify and Apple have already cornered a large portion of the market. Spotify has attracted over 50 million paying subscribers, and Apple recently said it has 27 million subscribers (up nicely from 20 million in December).

Meanwhile, Apple and Alphabet have so much cash on their balance sheets that they can afford to lose billions of dollars as they build out their streaming services.

Going forward, streaming-music competition will undoubtedly continue to escalate as services compete for new subscribers in this hot market. Indeed, the battle intensified recently when Pandora launched a major Spotify-like extension of its service, which enables customers to listen to specific albums and songs. Apple also recently introduced a new, exclusive TV-quality show as a perk for Apple Music subscribers, suggesting the company plans to expand the scope of its service to original video content.

If Tesla is launching its own music service, it will have to be unique to stand out from competition -- and will need to enhance the customer experience to be worth it.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Daniel Sparks owns shares of Apple and Tesla. The Motley Fool owns shares of and recommends Alphabet (A and C shares), Amazon, Apple, Pandora Media, and Tesla. The Motley Fool has a disclosure policy.