For years, smartphone vendors have pushed the availability of apps as a major selling point. Now, some are altering that strategy to focus more on integrated content and services, in what is poised be the next phase in the mobile device wars.
HTC Corp. Tuesday released its first smartphone, the HTC Sensation 4G, that comes with the company's own video service, the result of a recent acquisition. Using the service, owners will be able to rent or purchase more than 600 movies or TV shows via their phone.
The Taiwan company didn't disclose pricing, and says the HTC Sensation will be available world-wide in the second quarter.
Executives say content is king in the mobile business, but the problem is that software applications as the main form of content is quickly becoming commoditized. While Google Inc. and Apple Inc. boast hundreds of thousands of apps, HTC and others say loading a smartphone with too many items is confusing for consumers.
At the same time, analysts say most consumers are looking for similar apps. According to a June 2010 study by researcher Nielsen Co., four of the top five apps that registered as the most popular across all smartphones including Apple, Android and Research In Motion Ltd.'s BlackBerry were the same.
The dominance of Google's Android operating system, which market researcher Gartner Inc. predicts will run on nearly half of the world's smartphones by next year, is forcing vendors such as HTC, Motorola Mobility Holdings Inc. and Sony Ericsson to find ways to differentiate.
Aaron Woodman, director of Microsoft Corp.'s mobile communications business, says vendors will have trouble standing out on the basis of apps alone. "I believe that apps are one wave of competition," Mr. Woodman says. "I believe services are one of the next waves we will see that will differentiate phones."
Microsoft is betting on services from the videogame and computer worlds such as Xbox Live and SkyDrive, a free online storage service, as it tries to build on its challenged position in the smartphone race.
Other companies are also building on their content and services to help differentiate their smartphones. HTC's video service is the result of its $48.6 million acquisition of Saffron Digital in February. This month, Sony Ericsson started selling its Xperia Play smartphone, the first PlayStation-certified smartphone, and Google acquired PushLife, a service that allows music fans to port their Apple iTunes libraries to non-Apple phones.
Wireless carriers have also tried to offer similar content services in the past, with mixed results.
Analysts say manufacturers are increasingly adding more in-house capabilities to integrate into their smartphones to stand out as the space heats up. Apple with its iTunes service is the farthest ahead in the race, especially when it comes to integrating the content across multiple devices such as televisions and PCs, they say.
"It does go beyond apps," says Tim Shepherd, analyst with Canalys.
However, the strategy comes with challenges, the biggest of which is cost. Content providers are generally unwilling to limit their opportunity to just one vendor, making exclusivity prohibitively expensive.
So, while Sony Ericsson may have the first Playstation-ready smartphone, Sony Corp. made its videogame content available to all Android smartphones and tablets in January.
HTC says Saffron Digital for now will remain a separate entity and continue to serve its other customers, who include Nokia, Motorola and Samsung Electronics Co.
Kouji Kodera, HTC's chief product officer, says HTC purchased Saffron Digital,because it wanted to create a better experience for downloading and viewing content on its devices. For example, HTC's service allows users to start viewing the movie while it's downloading.
Unless the content is integrated into the user interface on the phone in a way that makes it easy to find, people won't use it, Mr. Kodera says. Often if the service comes from a separate company, "you get into the battle of which user experience is best," he adds.
In addition to purchasing Saffron Digital, HTC in February invested $40 million in OnLive Inc. a Silicon Valley Internet gaming firm. HTC is integrating the OnLive service in its Flyer tablet so users can play videogames on their televisions via wireless broadband or on the tablet itself.
"Definitely when the smartphone penetration goes higher and the market size increases, the commoditization comes in," says Mr. Kodera. For HTC, "it's more about having full control over the experience."
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