Car Makers Hope to Lure Buyers With Fancy New Audio Options - WSJ

[Klaus]

Car Makers Hope to Lure Buyers
With Fancy New Audio Options

MILFORD, Mich. -- I've heard the opening riff of Deep Purple's classic rock hit "Smoke on the Water" about 5,000 times. But never quite like this: I'm sitting in the driver's seat of a Hummer H2 with a blasting six-channel DVD Audio system that reproduces the music with such clarity you can almost hear the tubes melting in Ritchie Blackmore's cranked amp.

This demonstration was a glimpse of what the post compact-disc world could sound like. It's a world the auto industry finally wants to enter.

What's in the center of your dashboard "is changing more in the next five years than it has in the last 30," says Mark Weston, product-marketing manager for audio and multimedia systems at Visteon, the big Dearborn, Mich., supplier of vehicle audio systems.

Within the next five years, Mr. Weston says, the CD/AM/FM formula will give way to a variety of new technologies, including DVD Audio, MP3 players, Super Audio CD players, and High Definition Radio that receives digital radio signals and can translate them into a surround-sound experience. That's not counting satellite radio, which is a still small but growing niche in the mobile audio business, and features not directly related to music playback, such as voice-activated controls and navigation systems.

This will happen not just because millions of consumers are bored by CDs and conventional radio, but because the auto and audio industries are highly motivated to develop something new that people will be excited about buying. What's one more luxury sedan with a six-CD changer? How about a luxury car with whomping surround-sound DVD Audio?

Right now, DVD Audio seems to be the big noise in mobile audio circles, although backers of a rival enhanced-music format called Super Audio CD, or SACD, would beg to differ.

Both formats can produce a surround-sound experience, like a home-theater system, and both cater to the business aspirations of the consumer-electronics and entertainment industry. To experience DVD Audio or SACD, you need to buy new hardware and lots of new "software" in the form of discs.

Which one will win in the mobile marketplace isn't clear. So far, there are more SACD titles on the market, industry officials say. But the companies backing DVD Audio say they will catch up soon.

But DVD Audio has an advantage in the auto business simply because "DVD" is something most people know about -- which appeals to car makers' conservative instincts.

Moreover, car makers already are putting DVD players in vehicles to handle rear-seat entertainment and navigation systems, notes Tom Dunn, marketing director of Panasonic's Automotive Systems Company unit.

General Motors Vice Chairman Robert Lutz was so impressed by a demonstration of DVD Audio that he spread the word through the No. 1 auto maker's product-development organization, where DVD Audio was already under consideration. "It's something we will be implementing on future vehicles," says Dave Bradford, audio-systems lead engineer for GM North America, who was giving demonstrations of the H2's DVD Audio system at a recent press event.

Mr. Bradford won't say which future GM models will get DVD Audio first or when, but it shouldn't be long: Competition to drive new technology into the center of the dashboard is heating up.

Honda's Acura luxury division plans to launch its redesigned Acura TL sedan this fall with a Panasonic DVD Audio system as standard equipment, spokesman Mike Spencer says.

"You shouldn't have to pay extra for premium features on a premium car," he says.

Toyota has DVD Audio on a car in Japan and probably won't wait long to answer Acura's challenge in the U.S.

Panasonic's Mr. Dunn, whose company has a 65% share for mobile DVD players, says following the Acura TL "you'll see announcements coming next year, and in 2005 and 2006 from other luxury nameplates. By 2007 it will no longer be limited to luxury nameplates."

One big downside for DVD Audio is price. Paul Williamsen, manager of product education for Toyota's U.S. sales operation, cautions that putting a DVD player in a car means "a big jump up in price."

A survey conducted by the Consumer Electronics Association found that 62% of those questioned think CD sound quality could be improved, and 61% were interested in DVD Audio after hearing how the systems perform. But 55% said the price they were willing to pay for this advanced technology was just $250. A more likely price point for DVD Audio systems as options -- $1,000 -- was endorsed by only 10% of those who responded.

Mobile audiophiles who don't want to wait for the car makers to install advanced DVD Audio systems, and who don't mind paying a premium to be first on the block, can head out to the local consumer-electronics store and look for one of the new DVD Audio players hitting the replacement radio market. One, the Pioneer ADH-P7500 DVD, is a do-it-all model that plays DVD Audio, DVD Video, DVD-R, CD-R, MP3s and displays pictures and touch controls on a seven-inch motorized screen. It even allows for dual-zone entertainment -- audio upfront, video in the back via a second screen. List price: $2,400.

Even at that price, "demand's pretty high," says Michael Townsen, vice president for marketing at the Pioneer Mobile Entertainment Division in Long Beach, Calif.

DVD Audio 5.1 disks have also been pricey. "The only 5.1 audio disks I have are the ones vendors give me as samples," says Toyota's Mr. Williamsen.

But a quick check on Amazon.com suggests prices for DVD Audio and rival SACD discs are moving into line with regular CDs. The DVD Audio version of R.E.M.'s "Automatic for the People" is listed at $14.99, while a recording of Beethoven's Symphony No. 3 conducted by Daniel Barenboim is $13.99.

Millions of consumers scorn standard CDs -- their music collections, whether nicked from sites like KaZaa or purchased legitimately -- are stored as MP3 files on computer hard drives.

It has taken a remarkably long time for the mobile audio and auto industries to respond to the MP3 revolution.

As of the 2003 model year, only 2% to 3% of vehicles were offered with audio systems capable of playing back compressed music files MP3s. But Visteon's Mr. Weston says that's going to change rapidly.

"You'll see a jump in the 2004 model year. The vehicles are just being built and tested right now," he says. "You'll see another significant jump in 2005."

Factory-installed MP3 players will mostly require customers burn their compressed music onto CDs; GM's Mr. Bradford says a problem with offering systems that can accept a flash memory card or some other computer memory device is that there are too many competing formats. Which means the compact disc will live on.

"Most people when they burn MP3s are burning them on to a CD," he says.

[Klaus]

Car Makers Hope to Lure Buyers
With Fancy New Audio Options

MILFORD, Mich. -- I've heard the opening riff of Deep Purple's classic rock hit "Smoke on the Water" about 5,000 times. But never quite like this: I'm sitting in the driver's seat of a Hummer H2 with a blasting six-channel DVD Audio system that reproduces the music with such clarity you can almost hear the tubes melting in Ritchie Blackmore's cranked amp.

This demonstration was a glimpse of what the post compact-disc world could sound like. It's a world the auto industry finally wants to enter.

What's in the center of your dashboard "is changing more in the next five years than it has in the last 30," says Mark Weston, product-marketing manager for audio and multimedia systems at Visteon, the big Dearborn, Mich., supplier of vehicle audio systems.

Within the next five years, Mr. Weston says, the CD/AM/FM formula will give way to a variety of new technologies, including DVD Audio, MP3 players, Super Audio CD players, and High Definition Radio that receives digital radio signals and can translate them into a surround-sound experience. That's not counting satellite radio, which is a still small but growing niche in the mobile audio business, and features not directly related to music playback, such as voice-activated controls and navigation systems.

This will happen not just because millions of consumers are bored by CDs and conventional radio, but because the auto and audio industries are highly motivated to develop something new that people will be excited about buying. What's one more luxury sedan with a six-CD changer? How about a luxury car with whomping surround-sound DVD Audio?

Right now, DVD Audio seems to be the big noise in mobile audio circles, although backers of a rival enhanced-music format called Super Audio CD, or SACD, would beg to differ.

Both formats can produce a surround-sound experience, like a home-theater system, and both cater to the business aspirations of the consumer-electronics and entertainment industry. To experience DVD Audio or SACD, you need to buy new hardware and lots of new "software" in the form of discs.

Which one will win in the mobile marketplace isn't clear. So far, there are more SACD titles on the market, industry officials say. But the companies backing DVD Audio say they will catch up soon.

But DVD Audio has an advantage in the auto business simply because "DVD" is something most people know about -- which appeals to car makers' conservative instincts.

Moreover, car makers already are putting DVD players in vehicles to handle rear-seat entertainment and navigation systems, notes Tom Dunn, marketing director of Panasonic's Automotive Systems Company unit.

General Motors Vice Chairman Robert Lutz was so impressed by a demonstration of DVD Audio that he spread the word through the No. 1 auto maker's product-development organization, where DVD Audio was already under consideration. "It's something we will be implementing on future vehicles," says Dave Bradford, audio-systems lead engineer for GM North America, who was giving demonstrations of the H2's DVD Audio system at a recent press event.

Mr. Bradford won't say which future GM models will get DVD Audio first or when, but it shouldn't be long: Competition to drive new technology into the center of the dashboard is heating up.

Honda's Acura luxury division plans to launch its redesigned Acura TL sedan this fall with a Panasonic DVD Audio system as standard equipment, spokesman Mike Spencer says.

"You shouldn't have to pay extra for premium features on a premium car," he says.

Toyota has DVD Audio on a car in Japan and probably won't wait long to answer Acura's challenge in the U.S.

Panasonic's Mr. Dunn, whose company has a 65% share for mobile DVD players, says following the Acura TL "you'll see announcements coming next year, and in 2005 and 2006 from other luxury nameplates. By 2007 it will no longer be limited to luxury nameplates."

One big downside for DVD Audio is price. Paul Williamsen, manager of product education for Toyota's U.S. sales operation, cautions that putting a DVD player in a car means "a big jump up in price."

A survey conducted by the Consumer Electronics Association found that 62% of those questioned think CD sound quality could be improved, and 61% were interested in DVD Audio after hearing how the systems perform. But 55% said the price they were willing to pay for this advanced technology was just $250. A more likely price point for DVD Audio systems as options -- $1,000 -- was endorsed by only 10% of those who responded.

Mobile audiophiles who don't want to wait for the car makers to install advanced DVD Audio systems, and who don't mind paying a premium to be first on the block, can head out to the local consumer-electronics store and look for one of the new DVD Audio players hitting the replacement radio market. One, the Pioneer ADH-P7500 DVD, is a do-it-all model that plays DVD Audio, DVD Video, DVD-R, CD-R, MP3s and displays pictures and touch controls on a seven-inch motorized screen. It even allows for dual-zone entertainment -- audio upfront, video in the back via a second screen. List price: $2,400.

Even at that price, "demand's pretty high," says Michael Townsen, vice president for marketing at the Pioneer Mobile Entertainment Division in Long Beach, Calif.

DVD Audio 5.1 disks have also been pricey. "The only 5.1 audio disks I have are the ones vendors give me as samples," says Toyota's Mr. Williamsen.

But a quick check on Amazon.com suggests prices for DVD Audio and rival SACD discs are moving into line with regular CDs. The DVD Audio version of R.E.M.'s "Automatic for the People" is listed at $14.99, while a recording of Beethoven's Symphony No. 3 conducted by Daniel Barenboim is $13.99.

Millions of consumers scorn standard CDs -- their music collections, whether nicked from sites like KaZaa or purchased legitimately -- are stored as MP3 files on computer hard drives.

It has taken a remarkably long time for the mobile audio and auto industries to respond to the MP3 revolution.

As of the 2003 model year, only 2% to 3% of vehicles were offered with audio systems capable of playing back compressed music files MP3s. But Visteon's Mr. Weston says that's going to change rapidly.

"You'll see a jump in the 2004 model year. The vehicles are just being built and tested right now," he says. "You'll see another significant jump in 2005."

Factory-installed MP3 players will mostly require customers burn their compressed music onto CDs; GM's Mr. Bradford says a problem with offering systems that can accept a flash memory card or some other computer memory device is that there are too many competing formats. Which means the compact disc will live on.

"Most people when they burn MP3s are burning them on to a CD," he says.