Ford (NYSE:F) didn't have to break the bank to acquire Livio, but it's sending a message that's louder than the roughly $10 million that it spent on the purchase.
Livio specializes in software that allows smartphone apps to connect to a car's dashboard entertainment system. The plan -- as ambitious as it may seem -- is for the two companies to develop an industry standard for connected cars.
Ford knows a thing or two about connected cars. Ford's SYNC AppLink is a major reason why 1.9 million vehicles hit the market last year with smartphone integration. A report by market watcher GSMA forecasts 21 million vehicles with smartphone integration solutions in place by 2018.
This is naturally great news for Pandora (NYSE:P). As the leading streaming app with more than 72 million unique monthly listeners, the music discovery star will benefit from seamless integration. If the moment that someone powers up a car, a Bluetooth smartphone can immediately begin playing Pandora with steering wheel or radio controls, usage is only going to increase.
Obviously, this is bad news for terrestrial radio. The easier it is for folks to stream Internet radio, pull up podcasts, or make calls, the less time there will be to tune into the commercial-laden AM and FM broadcasts.
Where does that leave Sirius XM Radio (NASDAQ:SIRI)? On the surface, it would seem to be pretty bad. If free radio comes under fire, won't premium satellite radio also fall victim to a plethora of a free, or nearly free, apps vying for attention? Well, things haven't exactly panned out that way.
CFO David Frear turned heads at a Piper Jaffray conference earlier this year by revealing that drivers of connected cars tend to convert at higher rates than those owning less tech-proficient vehicles. One can argue that early adopters of new cars with dashboard connectivity appreciate all forms of content, satellite radio included. Then again, it could also be a testament to Sirius XM's ability to put out differentiated content worth paying for.
In the end, numbers don't lie. Sirius XM topped 25 million subscribers this year, and that number is likely moving higher still in the current quarter that ends in a few days. Technology has been more of an asset than a liability to Sirius XM, and that's why Ford's deal with Livio -- just as introducing SYNC and SYNC AppLink before that -- won't hurt Sirius XM.
Longtime Fool contributor Rick Munarriz owns shares of Ford. The Motley Fool recommends Ford and Pandora Media. The Motley Fool owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.