Samsung wants to follow Apple in building a giant services business

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Samsung wants to follow Apple in building a giant services business
Samsung wants to build a $50 billion-a-year services business. Who doesn't?
Photo: Mathieu Turle/Unsplash CC

Samsung wants to copy Apple’s success in services by establishing a $50 billion-a-year services business. This would help the company make up for falling smartphone sales with subscription sales.

Having invested heavily in software over the past four years, a senior Samsung executive said the company is working to turn this into, “meaningful customer experiences.”

Analysts are predicting that Samsung’s smartphone shipments are likely to increase by only 1-2% in the foreseeable future. As a result, it’s hoping to rake in subscription revenue from customers to keep business growing.

“We have a wave of new technologies coming,” a Samsung executive told the Financial Times. These include “cloud-based service delivery, advanced connectivity, large-scale connectivity done fast with 5G, and [artificial] intelligence.” It hopes to build on the 1 billion customer accounts for SmartThings, the smart home platform Samsung bought in 2014.

“First we need to have a good a product that people use, then you get scale, then you make money,” the unnamed Samsung executive said. “Not the other way around, which is a common mistake. So the timeframe for scale is [the] next two to three years, and in that timeframe we envisage service innovation opportunities.”

Samsung possible services

One possibility is a revenue sharing model in which Samsung takes a cut of transactions carried out using its products. For instance, there is an existing deal between MasterCard and Samsung, which lets customers order groceries from Samsung fridges.

Samsung has also moved into areas like mobile payments, with its Apple Pay rival Samsung Pay. Following Apple’s business model, it will be interesting to see if we get Samsung Music, Samsung Card, Samsung Arcade, Samsung original TV shows, and more in the coming years.

According to a recent report, Apple is current mulling launching a giant services bundle. This “Apple Prime”-type service would offer multiple Apple subscriptions under one monthly subscription.

Source: Financial Times