- Some TV companies lose money on hardware to profit from advertising
- The trend is especially 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 dying to show you ads, you’re not imagining things. The TV market is changing and that is both good and bad news for buyers.
As recently highlighted by market research agency Omdia (via FlatpanelsHD), the good news is that TVs are getting cheaper – so much so that some companies are actually losing money on the sets they sell.
The bad news is that they have to get that money from somewhere. And more and more often that somewhere is your living room and that something is you.
As Omdia notes, the business model for many TV companies is shifting from making profits from physical sales to making money from advertising (and although they didn’t specifically mention it, from user data).
Paul Gray, director of consumer electronics at the research firm, says: “People like to sell TVs below cost. You only have to look at the financials of Vizio or Roku to see that they sell TVs with a margin of somewhere between -3 and -7%, just in that battle for users.”
Advertising entertainment
Those manufacturers aren’t doing what Telly did in 2023, which is giving away dual-screen TVs completely for free in the hope of making money back with highly visible advertising. But especially in North America, advertising is an increasingly important part of the cash mix for TV manufacturers.
That could mean that American buyers in particular will increasingly have to make a choice: buy the TV for a low price and accept more ads, or pay more for a relatively ad-free experience.
I’m not against advertising; I’m obviously writing this for an ad-supported website. But the problem with companies betting on ad revenue is that the more companies do so, the less lucrative the payouts become – and that can create an arms race where lower and lower revenue per ad is offset by higher and higher numbers. of advertisements.
You can get around that to some extent by using a dongle or box like a Google TV Streamer or Apple TV 4K instead of the manufacturer’s own interface, but maybe not for long.
And of course this has no influence on the advertisements 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 initial cost can be repaid many times over over the life of our TVs.