Tesla's $1 Trillion Entertainment Hub Opportunity

Like millions of other tech bros, I’m currently reading Elon Musk’s biography by Walter Isaacson. The main takeaway so far is simple. Musk is never done expanding the vision he has for his companies, and he does whatever it takes to realize it. I mean, what else can you say about a founder who said this when his friends tried to talk him out of starting a rocket company? “The likeliest outcome is that I will lose all of my money. But what is the alternative? That there be no progress in space exploration? We’ve got to give this a shot, or we’re stuck on Earth forever, said Elon. That rocket company is “SpaceX” which built the largest rocketship of all time and is one of the most valuable private companies in the world at $150 Billion.

Elon’s tenacity is why I think Tesla plans to expand its already ambitious roadmap to dominate the electronic vehicle market. I believe Tesla will take on both the streaming and gaming industries. Quite frankly, in comparison to the goal of making humans a multi-planetary species by colonizing Mars, dominating the streaming and gaming markets seems easy. Let’s dive in.

The Entertainment Hub Opportunity

Tesla’s Infotainment System is already state-of-the-art with an unprecedented 17-inch touchscreen that increases to 18.5 in the new Cybertruck model. The display has standard maps and navigation, but also three unique features that hint at a greatly expanded future centered around Entertainment.

Theater Mode

Theater Mode already allows Tesla users to stream services such as Netflix, YouTube, and Hulu while parked. Elon has an opportunity to turn the Tesla display into one of the most-watched TV screens in the world. Hear me out. Full self-driving or as Tesla calls it “FSD” is closer than folks think. Musk said Tesla could achieve “level 4 or 5” self-driving as soon as the end of 2023.

Elon is notorious for declaring things will happen years before they actually do. But that’s his trick — set unrealistic timelines that force his teams to work unbelievably hard. While they rarely hit these deadlines, they do manage to pull the future forward. At this pace, if Tesla focuses on cozying up to Federal regulators and pushing towards Level 5 FSD, it’s conceivable that drivers could sit back and watch Netflix with a tub of popcorn within the decade.

Just imagine the opportunity. People are going to spend billions of hours streaming content while commuting in cars. Becoming the media hub for all of that time spent in the car would enable Tesla to take a significant share of the $416B streaming video market by 2030.

The average car windshield is 10-12 square feet. The Tesla Model X came out with a panoramic windshield that is more than double that at a massive 31 square feet.

Picture the immersive viewing experience Tesla could provide if the entire panoramic windshield turned into a TV screen. Watching a visually stunning movie with surround sound audio like “Oppenheimer” would be incredible. Check out this video of the making of the Panoramic windshield to get an idea of what is possible.

Arcade Mode

The Gaming TAM is an even bigger opportunity with the market expected to grow to over $500B by 2030. Tesla already offers more than 6,000 games via its integration with Valve’s video game distribution service "Steam." Elon tweeted a preview of this when it launched at the end of 2022.

With some of the games your steering wheel becomes the controller such as “Beach Buggy Racing 2.” This experience would be taken a step further with FSD and VR. Formula 1 has become wildly popular recently due to its Netflix series “Drive to Survive.” Watching the show on your panoramic Tesla screen would be one thing. Simulating being a Formula 1 driver with a VR headset on, while your car is actually driving, would take immersion to a whole other level.

The Tesla could become a gamer’s utopia. No more feeling bad about neglecting your family while you game alone in your bedroom. Gamers can now use their daily commute to battle their friends in “Call of Duty” while shit-talking via Bluetooth headset.

How Tesla Gets There

App Store

You might be saying to yourself at this point "This is cool and all but is Tesla actually working on this future?" If you read between the "Tweet Leaves" like I do it sure seems that way. Recent leaks suggest Tesla is working on building its own app store.

Powering the app store is key to owning distribution in both streaming and gaming. Apple’s app store processed a whopping $1.1 Trillion transactions in 2022. Apple dominates the app store on iOS, while Google rules the Android ecosystem with Google Play. Together they generate over $30B per quarter with mobile games making up 63% of revenue. One user even built a mock Tesla app store to envision what it would look like here:

It’s easy to see Tesla expanding its support of Streaming TV and gaming apps since it already supports both. But the use cases for a Tesla app store go far beyond Entertainment. I had a great conversation with a subscriber Roger Franklin who sees Tesla’s opportunity as a commerce juggernaut. If you watched the video above you will see one example where you can use the Tesla display to order fast food like Burger King while on a road trip. But if you layer in AI, personalization, and FSD, the possibilities are endless. Imagine the Tesla being able to run errands for you while you’re at work like grocery shopping and picking medication up at the pharmacy. Sure, DoorDash is a form of this. But self-driving puts the power in the hands of the individual car owner. Assuming better battery life, you could have your car do all kinds of things for you to earn money and reduce chores while you focus on work and leisure. Anyway, I’ll have to go deeper on this topic in another post.

Automotive OS

Android currently owns the largest percentage of the automotive operating system (OS) market at 35%, followed by Apple CarPlay. These smartphone integrations are a “must-have” for 86% of car buyers. Now that’s a strong moat. Well, Tesla has never played nice with Google and Apple and does not support either OS. This strongly suggests Tesla wants to own this ecosystem. I think they can, but it won’t be easy.

Tesla first needs to build up its app store developer ecosystem since no app store thrives without a healthy developer network. This can happen through offering developer incentives and lucrative rev-share programs.

Secondly, Tesla doesn't sell enough cars to achieve significant scale for its "Entertainment Hub." While Tesla owns 50% of the EV market, there are still only 1.7 Million electronic vehicles in the U.S. vs. an estimated 285 Million cars overall. However, due to climate change fears and government incentives, 40% of new car sales are projected to be electric by 2030. This means the ratio of EV/gas-powered cars on the road will drastically change over the decade in Tesla's favor.

Lastly, besides building the car, Tesla has one major advantage Google and Apple will never be able to compete with. Tesla owns the all-important EV charging network. This is the key differentiator Tesla can leverage to force other car manufacturers to adopt their OS. Earlier this year, Tesla announced it was opening its charging network to all rival electric car manufacturers such as Ford and GM. A requirement for tapping into Tesla’s supercharger network is using Tesla’s app and a standardized payment method. Well, owning the payment method is how Apple and Google dominate their respective app stores on mobile since they can collect a tax on every transaction. Tesla’s gangster move, then, is to tie the adoption of its Automotive OS to a requirement for accessing its charging network.

Full Self-Driving

Even if Tesla executes flawlessly on the above, this all still hinges on full self-driving becoming a reality. If you ask Elon, it’s inevitable and will be here within the decade. I’m not going to pretend to have any idea when all of the different pieces will fall into place for FSD to be the norm. So I thought I would ask ChatGPT and Google’s Bard AI to see what they thought the timeline looked like. Both answered like true politicians and were non-committal to a timeline, but Bard said something interesting that led to yet another Elon advantage. Bard thought internet connectivity could be a limitation to ensuring quality streaming while in your car. Good thing Elon has yet another product that solves this. Starlink, SpaceX’s satellite constellation product, provides high-speed Internet coverage in hard-to-reach rural and remote areas. Starlink is yet another product Elon could leverage to create a moat in the streaming space.

Conclusion

Between commuting to work (people are doing this again), running errands, and going on road trips, Americans spend more than an hour per day in their cars. This adds another hour of our attention up for grabs. Americans already spend three hours on average watching TV, so this hour gives Elon and Tesla the opportunity to become a trillion-dollar company again by taking a share of the lucrative streaming and gaming markets. Get your popcorn ready…for the car. 🍿