The Business of Smart TVs Includes Data and Advertising

For TV manufacturers, the business of smart TVs is now also about data and advertising. For TV manufacturers and smart TV platform owners alike, the smart TV business lifecycle is no longer just about per-unit revenues at time of retail sale and shares of subscription and transactional video revenues. The value of leveraging an installed base for targeted advertising and measurement data provides an additional recurring revenue stream that grows in value as the platform’s installed base grows.

A substantial reason for this evolution of the product category has been the development of well-defined and regularly-maintained smart TV operating systems (or “platforms”).The use of these platforms add functionality and value beyond the simple traditional value equation comprised of cost and hardware specifications. The fast obsolescence of older smart TVs due to quickly outdated custom OTT client apps is now a thing of the past. Updates to streaming services’ apps can now be deployed independently through the app stores on today’s smart TV platforms.

The primary point of home entertainment consumption has moved from service provider set-top boxes to consumer-owned streaming devices. Smart TVs are consumers’ preferred streaming device and TV companies are now aware that the smart TV is a treasure trove of data – data that can be leveraged to generate an additional long-term revenue stream via advertising and/or audience measurement. This dynamic transforms a one-time short-term transactional revenue generation attached to the sale of each smart TV into a single component of the total potential smart TV revenue model.

TV manufacturers are now aware of the long-term revenue stream potentially generated by their smart TV installed base. Having the ability to implement the per-device level of measurement and control needed to stand up a viable smart TV measurement and advertising business requires ownership of the smart TV platform itself.? As such, what it means to be “in the smart TV business” has now expanded substantially from the definition of years past.

So why would a company like Walmart consider a purchase of a company like Vizio?? Vizio has a well- developed free ad-supported streaming platform and its own ad sales team. Their ad revenue and service revenue are now higher than their hardware revenues. Like much happening in the video distribution world these days, this isn’t a hardware purchase, it’s a foot in the door to ad-based streaming revenue.

Vizio is a unique TV competitor that has focused on the US as its sole market and is consistently a top TV brand at US retail stores. The company rides a unique niche situated between the premium brand positioning of LG and Samsung at the top of the market, and budget brands below. The company’s position of offering affordable premium products has served it well in the US and affords it the unique position of being the only other manufacturer currently in the US market besides Samsung, LG, Roku, Amazon, and Hisense that has dedicated the resources to develop its own smart TV OS.

Vizio’s unique competitive position gives the company the advantage of being able to innovate its platform how it pleases, and in controlling the associated advertising and measurement revenue streams. Vizio’s success with SmartCast and its associated Vizio Ads and Inscape businesses has thus far been largely due to the success of Vizio’s TV value proposition itself in driving unit sales and, by extension, installed base growth. The company’s overall SmartCast strategy is yielding substantial growth in active users of the platform, which in turn will yield revenue generation from advertising and measurement.

The rumored sale to Walmart would place it more in competition with Amazon, providing valuable data that can be leveraged for higher ad viewership and synergy for retail purchases that will together boost revenue.

Parks Associates extensively covers the smart tv, streaming media, and broadband markets, as well as other key ecosystems in the connected home. For more information on our research, visit www.parksassociates.com or contact our team today at [email protected].