dreamingboy's  Instablog

HTC has announced that it has made a large investment in Saffron Digital, a London-based digital media delivery company.

Saffron had a great year in 2010 with loads of integration in products by HTC, LG, Sony Ericsson, Nokia, T-Mobile and Paramount, mostly in Europe.

The investment from HTC will allow Saffron to expand to other markets, most notably, Asia.

 

Total solution of Cloud + Device: As I mentioned in the report, the emergence of Android getting No.1 in smartphone OS market signifies the arrival of the era of homogenization. The homogenization in terms of chipset and operating system squeezes the profit space of handset vendors. For HTC, if it does not want to see its gross margin below 10% in next 5-10 years, it has to strengthen its competitiveness in cloud side to provide total solution as service and application are important to make differentiations.

Saffron: Video solution provider: HTC shows us its strong sensitivity to market trend by choosing to cooperate with Microsoft and Android at very early time. This time, HTC correctly judges that video will play an important role in the future. The catalyst of video era is the great improvement in storage, computing, and communication, especially mobile communication. Apple once successfully gained competitiveness by integrating and streamlining the industry chain of mobile music. Now Saffron is duplicating the business model of Apple and streamlining the industry chain of mobile video. For example, Saffron has established extensive cooperation with video studio, mobile carriers and handset vendors. For video studio, it worry about lots of things such as royalty, content encoding and compression, billing, earning model, marketing, adaptation to different devices. Saffron convinces these studios of win-win situation by providing total solution including highly effective encoding and compression, flexible billing, automatic adaptation to device performance, ad insert, domain based encryption.

Possible good points: 1) Excellent video experience brings added value and differentiations for HTC handsets. 2) More preferable position when cooperating with US and Europe based mobile carriers and fighting back against robust competitor, Samsung. 3) Duplication of business model from Europe and USA to Asia 4) Stronger cloud platform comprising video and gaming.

Possible bad points: 1) implicit statement of the collapse of current strategic competitiveness 2) Hard to convince investors or partners of its capability to streamlining industry chain 3) No successful precedents in service and application in Taiwan 4) Culture conflict in service and application in Europe and USA may be huge barrier.