- Some TV firms are losing money on hardware in order to profit from ads
- The trend is particularly prominent in North America
- We can’t see the future because it’s stuck behind an unskippable ad
If you’ve been thinking that your smart TV is awfully keen on showing you ads, you’re not imagining it. The TV market is changing, and that’s both good news and bad news for buyers.
As recently highlighted by market research firm Omdia (via FlatpanelsHD), the good news is that TVs are getting cheaper – so much so that some firms are actually losing money on the sets they sell.
The bad news is that they need to get that money back from somewhere or something. And increasingly, that somewhere is your living room and the something is you.
As Omdia notes, the business model for many TV firms is shifting away from making profit from physical sales and towards making money from ads (and while they didn’t mention it specifically, from user data) instead.
The research firm’s consumer electronics research director Paul Gray says that “People are happy to sell TVs below cost. You just have to look at the finances of Vizio or Roku to see they’re selling TVs at somewhere between -3 and -7% margin, just in that scramble for users.”
Ads entertainment
Those manufacturers aren’t doing what Telly did in 2023, which was giving away dual-screen TVs completely free in the hope of making money back from very visible ads. But in North America especially, ads are an increasingly important part of the money mix for TV manufacturers.
That could mean US buyers in particular will increasingly have to make a choice: get the TV for a low price and put up with more ads, or pay more for a comparatively ad-free experience.
I’m not against ads; I’m writing this for an ad-supported website, of course. But the problem with firms betting the farm on ad income is that the more of them who do it, the less lucrative the payouts become – and that can cause an arms race where lower and lower per-ad revenues are compensated by higher and higher numbers of ads.
You can get around that to some extent by using a dongle or box such as a Google TV Streamer or Apple TV 4K instead of the manufacturer’s own interface, but perhaps not for long.
And of course, that doesn’t affect the ads that appear on the streaming services themselves. But I think we can already predict the next step: paying more for an ad-light or ad-free experience. What we save on the up-front cost may be repaid many times during the life of our TVs.