A major reason smart TVs are relatively cheap is because the devices can now be monetised well after sale, including the collection of viewer data for targeted advertising, according to comments by a US TV company CTO.

Vizio’s technology chief, Bill Baxter, explained the strategy to The Verge during the Consumer Electronics Expo in Las Vegas last week. The company’s smart TVs can track and record what is being watched at any point with the data used to sell targeted ads.

The practice means smart TVs can generate revenue long after purchase and an examination of the industry shows it is becoming a standard operation.

Smart selling

Consumer electronics have notoriously low margins already, but data collection and “post-purchase monetisation” are helping lower the price tags of smart tvs further still, according to Baxter.

“This is a cutthroat industry. It’s a 6 per cent margin industry, right,” Baxter said during a Verge podcast.

“…You could say it’s self-inflicted, or you could say there’s a greater strategy going on here, and there is. The greater strategy is I really don’t need to make money off of the TV. I need to cover my cost.

“And then I need to make money off those TVs.”

Vizio TVs can, with user opt-in, monitor what is on screen at any point, what the company calls “automatic content recognition”. That data is not sold directly, at least not anymore. In 2017 Vizio paid a $US2.5 million dollar fine to settle allegations they sold viewer data.

Legal documents from the case reportedly show data was sold to data brokers and marketing firms to analyse viewing patterns and campaign performance. Now, Vizio keeps the data but sells targeted advertising in a platform model like Google and Facebook.

Baxter said Vizio anonymised the viewer data and and did not infringe on user privacy.

How much data is collected remains unclear but The Verge’s editor in chief, Nilay Patel, tweeted that a connected Vizio P-Series TV which is not set up for streaming still pings a server over 500,000 times a week or nearly once every second, much more than other connected devices.

Baxter also said “dumb” TVs, those without an internet connection, would require higher retail margins because of the inability to monetise them after purchase. The post-purchase monetisation of smart tvs is a big opportunity, Baxter says, because tvs now stay in homes for the best part of a decade —the average lifespan of a Vizio TV is just under seven years.

Vizio does not sell televisions in the Australian market but similar practices are common.

TV middlemen

Samba TV is a leading TV data company with investors like Disney and Time Warner. The company has deals with manufacturers including Sony, Phillips and TCL to include Samba software on smart tvs.

A report from the New York Times revealed the company has collected data from more than 13 million TVs in 10 million homes and raised $40 million in venture funding. 

Like Vizio, with user consent Samba TV can track what is being viewed on the screen, offering advertisers highly targeted audiences. Again, this can help keep TV prices down. Samba TV said “our business model does subsidise a small piece of the television hardware,” though it declined to provide The Times with further details.

Around 90 per cent of all Samba TV enabled users opt in to its service, according to the company.

But the high opt in may be more a case of consumers preferring to click accept in good faith rather than reading privacy policies and terms and conditions — over 10,000 words in the case of Samba.

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