SanDisk’s Audio/ Video strategy has three elements: globalization, innovation and synergies. Last week I rambled on about globalization and innovation. This week I’m going to give synergies/content a try.
SanDisk is nicely positioned to capitalize and profit from globalization. SanDisk has the lowest costs for consumer electronics products where NAND dominates the bill of materials, thanks to in-house NAND production and the farthest reach thanks to its 200,000+ storefronts.
In Q4:06 SanDisk’s strongest sequential growth in both units and megabytes was in its Sansa MP3 products, which accounted for 14% of SanDisk’s product revenue. For 2006 as a whole MP3 related revenue reached 9% of total revenues or about $275M. Not bad for a new product line up against some stiff competition and only on the market for 14 months or so.
This is the good news.
SanDisk has had far less commercial success to date on the innovation front in consumer electronics. SanDisk’s large screen Sansa View video player is back in redesign, while the award-winning SanDisk Connect seems unlikely to ever live up to its potential.
Hopefully SanDisk learned a lot from both experiences and will be able to use the related video and WiFi technology in other or re-released products.
SanDisk has another very interesting and innovative product in the pipeline– USBTV, which I am going to discuss later in this post. USBTV was conceived and developed by msystems. It is a deceptively simple device for bringing video from computer to TV.
Whether USB-TV is a market-place success remains to be seen. It does though, highlight potential synergies which long term may become an important story for SanDisk.
This post is really about beginning to look at those potential synergies. The place to start is with Kate Purmal. Kate is Senior VP & GM of SanDisk’s Digital Content group. What she is up to beyond USBTV, is something of a mystery, but there are clues.
SanDisk has made its name selling all kinds of flash-based devices for storing digital content. Recently SanDisk has branched out and started selling products that play digital content. But at least until now, SanDisk hasn’t shown any real interest in leveraging digital content itself or rubbing shoulders in Hollywood.
With USBTV, SanDisk finds itself talking directly and at length with the video content providers. Kate’s the gal.
Kate is the soccer mom recently featured in the WSJ. She’s photogenic, articulate and seems slated to be the stylish, media-savvy, younger face on the SanDisk management team.
With more than 20 years in the computer industry, Kate knows her way around Silicon Valley. She was one of the founding members of Palm Computing where she built and ran the product marketing and strategic alliance organization, helping to build the developer community supporting the Palm OS. In addition, she has held senior roles in marketing, product marketing, business development, sales, and engineering at Interleaf, Grid Systems, and Computer Associates.
In early 2005 she was hired by Dov and Eli to be CEO of U3, the msystems/ SanDisk joint venture for smart USB drives. In January 2007 she moved over to SanDisk to run SanDisk’s Digital Content group. Kate’s thing is platform building. Her first challenge will be drumming up support for USBTV, but her responsibilities don’t end there.
At this year’s analyst day, Kate spoke in broad terms about what SanDisk might be up to on the content front. My sense is that her comments apply not only to USBTV, but also to greater and broader aspirations for digital content.
In general terms Kate spoke about a “focussed effort in the content arena” based on an “open architectural system” that SanDisk is creating that enables SanDisk to “not only to provide services that are well integrated end-to-end, but [also to] discover and add in other services over time.”
To begin with SanDisk is taking an “ecosystem approach” to get in the game “with a reasonable investment.” If successful, SanDisk believes it has the potential to “generate new revenue streams,” and not “only purchase streams, but also advertising models and other ways that [SanDisk] will see revenue generated for content providers.”
Put another way, SanDisk believes its strengths in next-gen digital media (memory cards/USB drives/ USBTV/etc), digital media players (Sansas) and a potential mobile security standard (TrustedFlash) will give it an entree to the world of content providers. If this is how things go, SanDisk believes it will have opportunities to make money and build its brand in new and creative ways (advertising).
To my mind, no matter how USBTV fares, cards and mobile are the key. Believe SanDisk has real shot to ride the mobile wave all the way to the bank on digital content. When all is said and done, the dynamic with TrustedFlash and advertising may end up different than conceptualized today. USBTV may never make it. No matter.
If the microSD card becomes the DVD of the mobile device and the mobile device becomes the PC of tomorrow, SanDisk will be sitting pretty in a globalized tomorrow.
USBTV & TakeTV
At CES, in January of the year, SanDisk announced the USBTV platform, an inexpensive, compact consumer electronics device for bringing online video into the living room. Plug it into a computer like a USB drive, drag and drop a downloaded video files onto it. Remove and plug it into a TV and it is a video player/decoder with DVD player-like onscreen menus managed by remote control (included). USBTV white paper
In addition, thanks to integrated DRM functionality, if desired, it can be used with content download services such as Guba, Movielink, and Akimbo (announced supporters.)
SanDisk is working with TV manufacturers, including LG, Mitsubishi, and Pioneer, to include a special USB connector on their TV sets. Although such a video-optimized USB connector would be the easiest way of connecting the USBTV, its not required. The USBTV player can be connected through a TV’s standard A/V sockets with an adapter cradle.
SanDisk hopes to establish USBTV as a standard that it will use and others will license. The first USBTV players were expected this last spring. Something has slipped. Hopefully the time was needed for new partners to have signed on. Whatever the case, soon we should get news. In September SanDisk said that its USBTV product is still on track to be released this year. Not much time left.
USBTV is the name of the platform. My guess is that TakeTV will be the name of SanDisk’s product. On July 18, 2007 SanDisk filed a trademark application for TakeTV. Uses listed in the application include: computer hardware and software for viewing downloaded content; computer and software for transmitting downloaded content; hardware plug compatible with standard connectors that can carry video protected or pre-owned by users; and content download services for downloading content from websites, digital content kiosks, DVD stations. Sure sounds like USBTV to me.
In the bigger picture, the USBTV platform is only one piece in SanDisk’s content strategy. To my mind the key will be whether SanDisk can stay ahead of the competition with best priced solid state memory, whether MLC NAND, x3, x4 or the most promising 3D Matrix memory. If it can, there will be lots of opportunities for Kate and the rest of SanDisk’s content group.
In-house, best-priced solid state memory combined with on-board processing power is going to be most attractive for delivering and leveraging content whether the form factor is memory cards, USB drives, USBTV, SSDs or new and innovative form factors not developed yet.