Analysis: Why Spotify’s ‘Car Thing’ Was Destined for the Hardware Graveyard

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LOS ANGELES/STOCKHOLM, July 27 (Reuters) – Spotify Technology SA’s (SPOT.N) Car Thing player is now a thing of the past.

The world’s leading audio streaming service said on Wednesday it would discontinue the device just five months after it was made available to all users in the United States. Read more In doing so, Spotify has become the latest software technology company to stumble in an attempt to build hardware.

Spotify wrote about a $31 million investment in the device, which was aimed at increasing the number of users who listen to music or podcasts in the car. However, the company said it was unable to sell enough devices at a high enough price to justify the investment.

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“We just can’t give it an attractive economic profile,” Spotify CEO Daniel Ek told Reuters. “So we’ve decided to end this program in light of that.”

Car Thing was a next-generation stereo designed to stream Spotify music and podcasts from the user’s phone through the car’s audio system. After unveiling the trials in May 2019, Spotify tested the device with a small group of people in April 2021 and then rolled it out to a larger version in February this year.

Spotify wasn’t the first software company to seek to extend its relationship with users in the physical world through devices.

Alphabet Inc’s Google (GOOGL.O) was one of the first software companies to venture into hardware experiments with major flaws, including Google Glass – a wearable, goggle-like Android device that displayed information in the user’s field of vision.

Snap Inc shelved its original Spectacles, $130 sunglasses that streamed video directly to the SnapChat app, in 2017. It announced a new type of Spectacles last year, with augmented reality.

Facebook of Meta Platforms Inc (META.O) plans to stop producing a consumer version of a video conferencing device dubbed Portal, focusing instead on the enterprise market. It also disappointed people with its phone released in 2013 in partnership with HTC. It launched to mixed reviews, with reviews raising privacy concerns.

IDC research vice president Frank Gillett said he couldn’t remember any content company that had made a successful transition to hardware.

In contrast, a hardware maker like Apple Inc (AAPL.O) was able to launch music and video services by leveraging its operating system and existing relationship with consumers.

“When they created the iPod, they had people in the ecosystem,” Gillett said, adding that launching a device without such infrastructure “is extremely difficult.”

While Spotify dominates the music streaming niche, building a device for the car puts it in a competitive arena with Apple CarPlay and Android Auto – both of which have support for their own ecosystems of billions of devices.

Spotify said its device was not designed to challenge those entertainment systems, but rather to provide an easier way for its users – especially those with older car models – to listen to music or podcasts.

However, Car Thing lacked the functionality of other infotainment devices, from navigation to calls, which made it harder to justify the need for a music-only device. It also required free listeners to upgrade to a premium subscription.

Spotify Chief Financial Officer Paul Vogel told investors on Wednesday that in addition to pricing issues, inflation has driven up component costs and a shortage of chips has made it more difficult to obtain parts.

Veteran consumer electronics analyst Tim Bajarin of Creative Strategies said consumers are hesitant to add devices to their cars when 98% of new cars in the United States already come with Apple CarPlay.

“I remember thinking, ‘It’s dead in the water,'” Bajarin said.

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Reporting by Dawn Chmielewski in Los Angeles and Supantha Mukherjee in Stockholm Editing by Matthew Lewis

Our standards: The Thomson Reuters Trust Principles.

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