Samsung Electronics recently announced it had acquired startup Boxee, Inc. for an undisclosed sum speculated to be less than $30 million. Boxee's best-known product was its trademark media center software, first released in 2008, although in more recent years, the company made moves into the hardware business (via Boxee Box and Boxee TV) and cloud-based DVR services.
In 2011, Boxee sold 120,000 units of the Boxee Box. As of April 2012, the company had 2 million users, including roughly 200,000 Boxee Box owners, with the majority users of its now-discontinued media center software.
There are a number of justifications for this acquisition.
Boxee's cloud DVR functionality can be seen as a value-added differentiator for the Samsung connected device ecosystem. It represents a potential way of distinguishing the Samsung ecosystem from that of other large consumer electronics companies. Under this scenario, the addition of cloud DVR services and place-shifted live TV viewing could, if effectively employed, allow Samsung a stronger position in convincing consumers to buy into its video ecosystem. This could potentially be a significant value-added differentiator in a market where popular products in the streaming video ecosystem, such as smartphones, tablets, smart TVs, and Blu-ray players, continually face commoditization - constant innovation remains critical to maintaining a value proposition around devices in these areas.
Another reason for Boxee's sale may also have been simple necessity. The company has not seen substantial mainstream adoption of its products, and the sale may have been required to recoup the rumoured $30m of capital invested since 2008. The majority of usage has been via Boxee's free app, and the company has struggled to successfully monetize its hardware business. According to its SoC supplier, the Boxee Box was sold internationally at a loss and the Boxee TV DVR product had not attracted a substantial number of users. Thus, the company's sale to Samsung may have been prompted by financial conditions - options for Boxee being either the seeking an additional round of funding or the sale of the company and return of capital to investors.
A combined devices and services proposition connecting Samsung TVs, smartphones, tablets and other connected/smart devices would seem to be a strong justification for the deal. With regards to hardware, Samsung is the 5th-largest set-top box manufacturer globally and would gain little value from the relationship with Boxee manufacturing partner D-Link.
The deal has an added bonus for Samsung, allowing the manufacturer to inexpensively acquire a team with solid experience in streaming video delivery to bolster its content business. Although Samsung already possesses data center, content hosting, content storage, and content streaming infrastructure on a scale that would dwarf that belonging to Boxee, and isknown to be aggressively hiring talent for its content segments, the expertise in negotations around the rights minefield which surrounds cloud DVR implementation, as well as Boxee's proprietary content-sharing technology, are both useful assets for Samsung to bring on board. In particular, the acquisition broadens Samsung's content sharing abilities, which have traditionally relied on the use of DLNA across devices on the home network.