TV prices have been something of an outlier this year. While the cost of smartphones, PCs and other types of gadgets has gone through the roof recently, the price of premium TVs has actually come down in some parts of the world. So why is that?
Well, TV makers are betting that they can ignore the soaring component costs blamed on the rise of AI, because they’re able to generate massive and continuous revenue from ads.
In other words, they’re no longer hardware companies, but rather advertisers, at least according to Omdia, which detailed this trend in a recent report.
According to Digitimes, which covered the report, Omdia’s analysts were “surprised” by the fact that TV prices in the first quarter of the year remained unchanged, even as the cost of memory and computer chips jumped through the roof. “The TV industry's profit model is increasingly shifting away from hardware margins and toward advertising revenue generated through smart-TV operating systems and connected-TV platforms,” Omdia concluded.
Samsung Electronics, the world’s biggest supplier of TVs, had warned at the start of the year that TV prices could rise as a result of the “RAMageddon,” but that forecast has so far been forestalled. The stability of TV prices is believed to be one of the reasons why industry sales were up 6% in the first quarter of the year, along with the fact that many people wanted to buy a new television for the FIFA World Cup.
These days, many new televisions are what we call “smart TVs,” which are connected to the web so that viewers can enjoy vast libraries of streaming content from the likes of Netflix, Amazon Prime Video, Disney+ etc. These platforms do a great job of giving people more things to watch compared to traditional broadcast-only TVs, but they’ve also been hijacked by almost every TV company as a vehicle to serve up an endless and growing number of ads, on their homescreens and in various other places. Those ads take the shape of both traditional advertisements and “content recommendations.”
Smart TVs make great ad platforms because they can hoover up vast amounts of data about people’s viewing habits, which can then be used to deliver more targeted ads. TV brands can then either sell the data, or sell ad space directly to advertisers, and make tons of money from it. This is why they can afford to offset the rising component costs that have led to price hikes with other electrical devices.
Omdia noted that they do still make decent money on premium and mid-range models, because those TVs have better features that people are willing to pay for, but for cheaper televisions, most are now being sold for barely any profit at all. Companies are quite happy to make do with the ad revenue, it seems.
The U.S. is the most enthusiastic adopter of this trend. For instance, Omdia notes that Walmart recently bought the Vizio TV brand so that it could combine consumer’s shopping data with their viewing habits to further refine its ad-targeting systems. When someone buys a Vizio TV, they are forced to sign in with their Walmart account to take full advantage of its streaming capabilities, so it knows both what people are watching, and what they’re buying in its massive retail outlets and online stores. Meanwhile, Roku and Amazon Fire TV are also extremely popular in the U.S., and have built some of the most ad-heavy TV platforms around.
Sadly, Omdia says this trend is increasingly taking hold in Europe as well. It believes that smart TVs, which were almost non-existent just a few years ago, will make up 28% of all TVs in the region by 2030. The fastest-growing TV operating systems in Europe include Hisense’s Vidaa, and the Titan OS and TiVo OS platforms. All three have a tendency to gobble up viewer’s data and serve up plenty of ads.
The only real holdout from this trend is Apple, whose Apple TV 4K devices still do not show any ads, although they can still be seen when using the devices to watch streaming services like Netflix, which have their own ads. If you really want to avoid ads, the only real option is to buy a media player and physical copies of movies and TV shows, but it’s far more expensive and a lot less convenient.
