After shutting down its in-house book and music services, Samsung Electronics is closing the company's Video and Media Hub, which hasn't been able to compete with the likes of Netflix, Amazon and Google.
This change in Samsung's U.S. content strategy was first signaled in April when the company announced a deal with Amazon to replace its Hub Books with a customized Kindle application. Hub Books and Hub Music are no longer available and the Video and Media Hub will close Aug. 1.
"Samsung has obviously tried, and quite clearly failed. You have to applaud Samsung on one side for trying to be aggressive with its own suite of services, but that isn't what consumers wanted," said Paolo Pescatore, director for apps and media at market research company CCS Insight.
Competition in both the music and video segments has become much tougher recently and it isn't going to let up in either area for the foreseeable future.
Netflix's TV shows developed in-house, such as "Orange Is the New Black" and "House of Cards" set a new standard for what streaming video services have to offer to be competitive. At the same time, TV providers and telecom carriers worldwide are acquiring each other to meet this new threat.
Apple's acquisition of Beats Music and Google's acquisition of Songza, which was announced this week, shows the streaming music sector is going to become much more competitive as well.
These developments would have made it even more difficult for Samsung to succeed in those streaming markets, unless it had spent billions of dollars on acquisitions with the hope of turning around its fortunes in those markets.
However, the closure of its services doesn't mean that Samsung has given up on content as a way to lure consumers to choose its Galaxy smartphones and tablets over competing products. The way forward is to strike deals with partners, such as Amazon for books, Google and Slacker for music, and now M-GO for video, to which Video and Media Hub users can transfer purchased movies and TV shows.
"Samsung has realized it is very difficult to create content services on its own, and has realized a partnership approach is much much better," said Ben Wood, director of research at CCS Insight.
The company is instead in a strong situation to negotiate with content owners because of the popularity of its smartphones, tablets and TVs, according to Wood.
"It can just go to a big company like Disney and say, 'Hi guys, we can put your content on half a billion screens,'" he said.
On the products side, the partnership approach has been boiled down to the growing Galaxy Gifts offering, which consists of a long list of trial subscriptions and discounts so that users can try out various apps. When Samsung recently launched the Galaxy Tab S family of tablets, the list of partners included Amazon, Conde Nast, Dropbox and Marvel.
To appease worried users of the Video and Media Hub, Samsung has posted a lengthy FAQ.
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