Industry forecasts to 2008 & 2013
Automotive Entertainment Systems

in North America

Demand to reach US$9.5 billion in 2008
The North American market for light vehicle entertainment systems is projected to reach US $9.5 billion by 2008. Propelled by the introduction of innovative new technologies, demand for entertainment system hardware will maintain comparatively healthy growth profiles at both the OEM and aftermarket levels. Growth rates among the US, Mexico and Canada are expected to vary widely, with Mexico experiencing the greatest increase due to both high levels of export-focused light vehicle production and increasing local market demand, followed by the US and Canada.
Blaupunkt Chicago IVDM-7002 in-dash DVD system. United States 81%

Freedonia

Study # 1882 January 2005 $4100
nologies such as MP3/ WMA will also continue to make inroads due to their tremendous music and data storage capabilities.
Both integration, docking station trends emerging
North American Light Vehicle North American Light Vehicle Entertainment System Demand Entertainment System Demand
(US$9.5 billion, 2008) (US$9.5 billion, 2008) elements such as CD players and AM/FM radios). Among the new technologies expected to take increasing shares of the entertainment system market in North America are multimedia DVD players ($2 billion in 2008), satellite radio systems ($2 billion), audio systems equipped with data compression technologies ($1.2 billion) and disc drive multimedia systems ($740 million). Satellite radio systems have recently entered the mainstream at both the OEM and aftermarket levels. They have in particular generated significant interest at the OEM level, thus ensuring an increasing number of new light vehicles which feature integrated satellite radio capability.

Canada 11% Mexico 8%

Hard drives to make inroads
The pending introduction of disc drive-equipped multimedia systems at both the OEM and aftermarket levels could signal a paradigm shift in entertainment system technologies. The increasing robustness of micro disc drive technologies should allow entertainment system suppliers to dramatically expand services provided without the addition of bulky new hardware. Multimedia DVD players will continue to see strong growth opportunities, as these systems become more compact and either better integrated (OEM market) or more portable (aftermarket). Audio systems equipped with data compression tech-
Conventional audio under attack
The largest product category has been conventional audio systems (e.g., AM/FM/cassette/CD systems), but these are being challenged on multiple fronts. Sales of conventional audio systems will decline rapidly as new technology bundles are introduced (typically including conventional
The continued merging of vehicle entertainment functions across systems has become a key trend in both the OEM and aftermarket. Radios featuring navigation system capabilities are already available, and DVD players are featured in many vehicle navigation systems as well. A potential counter-trend to integration is emerging in which the vehicle simply becomes a docking station for portable disc drive devices such as Apples iPod digital music player. Ultimately, consumers may want both options in their vehicles.

Study coverage

This 204-page Freedonia industry study, Automotive Entertainment Systems in North America, is available for $4100. It provides historical demand data through 2003 and forecasts to 2008 and 2013 by product and market (Canada, US, Mexico). The study also details market shares and profiles 26 major firms.
Visit www.freedoniagroup.com for tables of contents & complete text & tables

Table of Contents

Introduction EXECUTIVE SUMMARY MARKET ENVIRONMENT
General.. 4 Aftermarket Leadership Under Threat. 4 OEM Market Changes.. 6 Macroeconomic Environment.. 8 United States.. 9 Canada.. 11 Mexico.. 12 Light Vehicle Supply & Demand Dynamics. 14 United States... 16 Canada.. 18 Mexico.. 19 Automotive Industry Trends. 20 United States... 22 Canada.. 24 Mexico.. 25 Legal & Regulatory Trends.. 27 Electronics Industry Trends.. 28 Pricing Trends.. 30 Foreign Trade & International Issues. 31 Global Supply & Demand Trends. 32 Trends in Foreign Trade.. 34
#1882 - Automotive Entertainment Systems in North America
TABLE III-4 MEXICO: AUTOMOTIVE ENTERTAINMENT SYSTEM DEMAND (million US dollars) Item Light Vehicle Production (mil units) $ OEM/vehicle Light Vehicles in Use (million units) $ aftermarket/vehicle Entertainment System Demand OEM Aftermarket Source: The Freedonia Group, Inc. 1993 1.1998 1.2003 1.2008 2.2013 2.5 335

TECHNOLOGY

11.0 12.6 15.6 18.2 21.2 Voice Activation Technology 3.6 5.2 6.7 8.8 11.6 As the sophistication levels of vehicle entertainment, information and 1085 communication systems continue to grow, concerns over public safety are expected to 280 Driver distraction contributes to at least 25 percent of fatal rise. traffic accidents, and105 concerns first focused on the use of cell phones by drivers have spread to other activities, including the operation of vehicle entertainment systems. Automotive electronics firms and vehicle OEMs are hoping voice activation technology can help to allay such safety fears. Voice recognition and activation software is rapidly becoming robust, but some current voice systems can be easily affected by factors such as open windows or voices from the audio system. Several vehicles available in the US currently feature voice-activated technologies, including versions of the ACURA RL, the JAGUAR S-TYPE sedan, the BMW 7 SERIES, and the INFINITI Q45. The technology has already made its way into the mass market, with Honda introducing it in highline versions of the ACCORD sedan and ODYSSEY minivan. The system used in the ODYSSEY responds to 637 commands, can understand different accents, and can find locations by voice command alone. While an integral part of the navigation system, it also operates the radio and climate controls.

SAMPLE PAGE

DEMAND BY COUNTRY & PRODUCT
General... 36 United States.. 38 Canada... 42 Mexico... 44 Demand by Product.. 47 Conventional Audio Systems.. 48 DVD Systems.. 49 Satellite Radio Systems.. 51 MP3/WMA-Equipped Systems.. 52 Hard Disk Drive Systems. 53
BLUETOOTH & Other Local Wireless Systems An emerging electronics-related innovation in the North American light vehicle market is the use of in-car wireless networks based on standards such as BLUETOOTH or 802.11b. These networks allow users to, for example, wirelessly connect their cell phones to communications systems in the vehicle. DaimlerChrysler introduced BLUETOOTH (named after a 10th-century Viking king known for uniting Denmark and Norway under Christianity) in its 2004 PACIFICA, and offers the technology in multiple product lines. CHART V-ENTERTAINMENT SYSTEM MARKET PENETRATION TRENDS, 1961 TO 2003 (US passenger car example)

90% 80%

A M r a d io A M / F M c a s s e t te C D p la y e r e q u ip p e d
Gives historical data through 2003 plus Freedonia forecasts to 2008 and 2013
Copyright by The Freedonia Group, Inc.
General... 55 Basic Technological Concepts.. 57 Semiconductors... 59 Sensors.. 60 Modules, Subsystems & Systems. 61 Automotive Entertainment Systems. 62 Conventional Audio Heads.. 63 Satellite Radio.. 64 Hard Disk Drive Systems. 65 MP3/WMA Players.. 66 DVD Players... 68 Other Systems & Components. 69 Technological Trends. 71 System Integration.. 73 Software Standardization & In-Vehicle Networks. 74 Voice Activation Technology.. 77 BLUETOOTH & Other Local Wireless Systems.. 77 Automotive Electronics Technology Evolution.. 79
70% 60% 50% 40% 30% 20% 10% 0% 1961

A M /F M m o n o

8 -T r a c k t a p e
Demand for MP3/WMA-equipped audio systems in the OEM and aftermarket light vehicle industry in North America will increase rapidly, reaching $1.2 billion in 2008. Demand will be enhanced by the abilities of MP3 and WMA compression technologies to dramatically increase the number of songs a given data storage device can hold. In the automotive industry,1 9this medium 6is typically a CD disk, although in the future, other media including flash memory or hard drives could take advantage of MP3/WMA technologies. -- pg. 44

A M / F M S te r e o MP3 p la y e r s S o u r c e : T h e F re e d o n ia G r o u p , I n c.

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Determine your market & sales potential Complement your research & planning Learn more about industry competitors Assess new products & technologies Identify firms to merge with or acquire Gather data for presentations Confirm your own internal data Make better business decisions

MARKET ASSESSMENT

General... 83
TABLE VI-1 AUTOMOTIVE ENTERTAINMENT SYSTEM OEM DEMAND IN NORTH AMERICA (million dollars) Item Light Vehicle Prdn (million units) $ OEM/vehicle North America OEM Demand Conventional Audio DVD Players Satellite Radio MP3/WMA Equipped Systems Hard Disk Drive Systems 1993 13.2008 2013
(continued on opposite page) Market Penetration Profiles.. 84 Market Pull.. 86 Regulatory Push.. 87 Rapid Penetration.. 88 Niche... 88 Entertainment System Market Penetration Analysis. 91 Wave I: AM Radio. 92 Wave II: AM/FM/Cassette. 93 Wave III: CD Player-Equipped Systems. 94 Entertainment System Market Penetration Trends.. 95 Current Situation.. 97
15.6 15.9 17.5 18.402 AFTERMARKET ENTERTAINMENT SYSTEM DEMAND
7600 Satellite Radio Systems 790 Aftermarket light vehicle demand for satellite radio systems in North 2510 America is projected170 to grow strongly, reaching $900 million in 2008. De mand will be driven by the increased 1750 offered via these systems, and variety high levels of familiarity consumers have with the systems. The two 1100 by the satellite radio companies are XM Satellite Radio and Sirius Satellite Radio, with XM taking the lead in signing up subscribers. At the end of 2004, XM had over 3.1 million subscribers and Sirius Satellite Radio had one million.
Explanations to support each tables data and forecasts
The satellite radio service providers are expanding the number of services they offer, and in Sirius case, it is expanding beyond simply offering traditional radio services. For example, in early 2004 Sirius announced it will offer real time traffic information to subscribers beginning in 2005. The new feature will be offered in a range of service options, and will be compatible with all navigational systems offered by both OEM and aftermarket suppliers. In 2004, Sirius and Delphi announced the future availability of in car mobile video transmission via the satellite radio network. The service is expected to be introduced by mid-2005. Delphis DELPHI XM SKYFI satellite radio was introduced in October 2002 for automotive and home applications. These radios are capable of playing over 100 satellite channels broadcast by XM Satellite. Visteon has an agreement with XM Satellite Radio to jointly produce and distribute digital satellite radio receivers for automotive applications. Blaupunkt maintains a production and distribution agreement with Sirius under which Blaupunkt makes and distributes units that receive and transmit Sirius broadcasts. These receivers, which were introduced in August 2004, are marketed under the AMERICA SR04 brand name for both automotive and home use. AMERICA SR04 units consist of removable tuners, in car plug and play mounting cradles, power supplies, wireless remote control and CHART VIII-1 antenna. NORTH AMERICAN AUTOMOTIVE ENTERTAINMENT SYSTEM MARKET SHARE BY COMPANY, Copyright by The Freedonia Group, Inc. (US$7.0 billion)

OEM ENTERTAINMENT SYSTEM DEMAND
General... 100 Conventional Audio Systems.. 102 AM/FM/CD Systems. 103 AM/FM/Cassette/CD Systems. 105 AM/FM/Cassette Systems.. 106 AM/FM Systems.. 107 DVD Systems... 109 Satellite Radio Systems. 112 MP3/WMA-Equipped Systems. 114 Hard Disk Drive Systems.. 116

COMPANY PROFILES

Others Harman International Industries Incorporated 71.8% 1101 Pennsylvania Avenue, Northwest Washington, DC 20004 202-http://www.harman.com
Data illustrated with the aid of 55 tables and charts
AFTERMARKET ENTERTAINMENT SYSTEM DEMAND
General... 119 Conventional Audio Systems.. 122 AM/FM/CD Systems. 123 AM/FM/Cassette/CD Systems. 124 AM/FM/Cassette Systems.. 125 AM/FM Systems.. 127 DVD Systems... 128 Satellite Radio Systems. 129 MP3/WMA-Equipped Systems. 131 Hard Disk Drive Systems.. 133

Pioneer

5.4% Market Leaders 28.2%

Delphi

SAMPLE 4.6% Visteon CHART
4.3% 3.9% 3.6% SANYO Kenwood Bosch
Sales: $2.7 billion (FY 2004) US Sales: $646 million (FY 2004) Employment: 10,605 (FY 2004) Key Products: sound systems, navigation systems, head units and other automotive electronics Harman International is a worldwide leader in the production of high fidelity audio and electronic systems. The Company operates through two segments: Consumer Systems and Professional. The Company is active in the automotive entertainment industry through the Consumer Systems segment, which had FY 2004 sales of $2.2 billion. The segment designs, manufactures and markets audio, video and electronic systems; and loudspeakers for automotive, home and computer applications. The segments plants are located in Northridge, California; Martinsville, Indiana; and Franklin, Kentucky. Outside of the US, the Consumer Systems segment has manufacturing facilities in Mexico (2), Germany (6), France, the United Kingdom and Hungary. Through the segment, Harman produces and supplies sound systems, navigation systems, head units and other automotive electronics. Harman produces automotive entertainment products through the HARMAN/KARDON, JBL, INFINITY and MARK LEVINSON lines. The HARMAN/KARDON line features ultrawide bandwidth and high current amplifiers. This brand encompasses tape decks, CD players, speakers, receivers, tuners and amplifiers. The line includes the BECKER 7860 six-CD changer. The CD changer can be used with the HARMAN KARDON TRAFFIC PRO II in vehicle CD/radio/navigation unit. Car products in the JBL line encompass the JBL SP8C two way in ceiling speaker and the JBL 177 Copyright by The Freedonia Group, Inc.

SAMPLE PROFILE

INDUSTRY STRUCTURE
General... 136 Industry Composition.. 138 Market Share.. 141 Research & Product Development. 143 Manufacturing.. 146 Marketing & Distribution.. 147 Financial Issues.. 154 Mergers, Acquisitions & Industry Restructuring. 156 Company Profiles.. 157-205
Profiles for 26 US industry participants
Company Profiles also feature:
Timely information on public/private companies Operations of pertinent division/sector/subsidiary Product lines, trade names, technical overviews Mergers/acquisitions, closures, expansion decisions

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SIRIUS And Blaupunkt To Provide Consumers With More Choices For Satellite Radio Hardware
Plug & Play and SIRIUS-Ready In-dash Units Expected in March 2004
CES, LAS VEGAS & NEW YORK January 8, 2004 Blaupunkt, the mobile electronics division of The Robert Bosch Corporation, and SIRIUS Satellite Radio (NASDAQ: SIRI), known for delivering the very best in commercial-free music and premium sports programming to cars and homes across the country, today announced that consumers will be able to purchase SIRIUS Plug & Play receivers and SIRIUS-ready satellite radios, the first-ever produced by Blaupunkt, at retail in the spring of 2004. At CES, Blaupunkt will preview two products designed to add SIRIUS Satellite Radio reception capabilities to the companys incar audio/video entertainment systems and conventional in-dash car stereo receivers. The first is a SIRIUS tuner module with a dedicated connection to Blaupunkts top-of-the-line audio/video entertainment system, and a separate composite video connection for use with any Blaupunkt in-car audio/video system. The second device is a portable Plug & Play SIRIUS receiver that provides satellite radio reception capability with a wireless interface that can be moved from home to car and back. Blaupunkts SIRIUS Satellite Radio tuner module can be connected directly to its top-of-the-line Chicago IVDM-7002 in-dash audio/video system. This remarkable whole-car entertainment system has a flip-out, motorized 7-inch widescreen LCD display, DVD/CD/MP3 player, and integrated 5.1 Dolby Digital Theatre System. In addition to providing outstanding reception, the tuner module will generate on-screen display of song title, performer, and category, and allow the control of channel selection and audio controls via the included handheld remote control or front panel controls. The Blaupunkt tuner module can also be used to add SIRIUS satellite radio reception to any Blaupunkt in-car audio/video system when used with the included remote control and a conventional composite video monitor to provide on-screen display. Blaupunkts SIRIUS portable Plug & Play satellite radio receiver will allow customers to listen to SIRIUS in a variety of locations, including cars, homes, trucks and boats. The car docking kit, when included with the purchase of the SIRIUS Plug & Play, allows the customer to use conventional line-level output connections or a wireless interface that rebroadcasts the satellite programming over an unused FM radio channel. A home docking kit will be sold separately. With the addition of a leading brand such as Blaupunkt, we are continuing to give satellite radio consumers a wider choice in hardware to complement our superior progamming, said Joseph P. Clayton, President and CEO, SIRIUS. Blaupunkts reputation as a producer of innovative, top of the line audio products is yet another example of how we are taking the lead in partnering with top brands. Blaupunkt is excited to join the satellite radio market, and provide consumers with a range of options from which to hear SIRIUS service with our high-end, user-friendly equipment, said Oliver N. Steinig, Director Product Marketing, Blaupunkt. It will also be a tremendous opportunity for our dealers to help build this dynamic new market. Pricing has also not been announced for either of these products. About SIRIUS SIRIUS is the only satellite radio service bringing listeners more than 100 streams of the best music and entertainment coast-tocoast. SIRIUS offers 60 music streams with no commercials, along with over 40 world-class sports, news and entertainment streams for a monthly subscription fee of only $12.95, with greater savings for upfront payments of multiple months or a year or more. SIRIUS is also the official satellite radio partner of the NFL. Stream Jockeys create and deliver uncompromised music in virtually every genre to our listeners 24 hours a day. Satellite radio products bringing SIRIUS to listeners in the car, truck, home, RV and boat are manufactured by Kenwood, Panasonic, Clarion and Audiovox, and are available at major retailers including Circuit City, Best Buy, Car Toys, Good Guys, Tweeter, Ultimate Electronics, Sears and Crutchfield. SIRIUS is the leading OEM satellite radio provider, with exclusive partnerships with DaimlerChrysler, Ford and BMW. Automotive brands currently offering SIRIUS radios in select new car models include BMW, MINI, Chrysler, Dodge, Jeep, Nissan, Infiniti, Mazda, Audi, Ford and Lincoln-Mercury. Automotive brands that have announced plans to offer SIRIUS in select models include Mercedes-Benz, Jaguar, Volvo, Volkswagen, Land Rover and Aston Martin. Genmar Holdings, the worlds largest manufacturer of recreational boats, Formula Boats and Winnebago, the leading supplier of recreational vehicles and motor homes, also offer SIRIUS. Hertz currently offers SIRIUS in 29 vehicle models at 53 major locations around the country. Click on sirius.com to listen to SIRIUS live, or to find a SIRIUS retailer or car dealer in your area. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions, future events or performance with respect to SIRIUS Satellite Radio Inc. are not historical facts and may be forward-looking and, accordingly, such statements involve estimates, assumptions and uncertainties which could cause actual results to differ materially from those expressed in any forward-looking statements. Accordingly, any such statements are qualified in their entirety by

reference to the factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2002 filed with the Securities and Exchange Commission. Among the key factors that have a direct bearing on our results of operations are: our dependence upon third parties to manufacture, distribute, market and sell SIRIUS radios and components for those radios; the unproven market for our service; our competitive position and any events which affect the useful life of our satellites.