VIZIO’s Platform Performs, Search and Discovery Remain An Issue

1. VIZIO’s Platform Performs

One of the more curious aspects of my job is the number of calls I have with people in the investment community who can’t seem to wrap their heads around why people who make the hardware necessary to watch TV also want to create additional revenue streams around programming and advertising.

It started with Roku several years back and now includes the big three US TV OEMs (Samsung, LG and VIZIO) and seems to truly baffle them. Only Amazon seems to get a pass, given that revenue from television constitutes such a small part of their overall haul.

That said, the wisdom of creating these alternate revenue streams was proven out once again this week as VIZIO reported a net profit of $4.7 million, largely on the back of its booming platform business which posted some impressive numbers: gross profit was up 23%, while revenue was up 30%, aided by a 25% increase in ad revenue.

So why do these plays still seem to baffle Wall Street?

Why It Matters

The main concern Wall Streeters have is that they feel that creating a FAST and selling advertising against it is some sort of herculean endeavor, one that the OEMs have no experience at and are thus bound to fail.

Their second concern is the nature of the FASTs themselves, the old “why would anyone want to watch a bunch of reruns with commercials when they could binge ad free reruns on Netflix all day long?”

There’s a third concern too, an outgrowth of the first two, which is will there actually be any brands reckless enough to run ads on these sorts of platforms?  

Fortunately for VIZIO and its OEM peers, none of these concerns are the least bit justified.

Yes, it’s somewhat counterintuitive for a company whose core business has been manufacturing television sets to launch an ad-supported content business, but hire the right people and it’s far from impossible, especially since there are built in advantages (ACR data and all the insights that come with it, the ability to control the interface) for the OEMs.

Getting advertisers on board isn’t a simple task either, but given (a) how many eyeballs are shifting to streaming and (b) how much of streaming inventory has traditionally been ad-free, you have a lot of pent-up demand.

That, and with each new entrant into the market, convincing advertisers that OEM FASTs are a good investment gets easier and easier. It’s almost a textbook example of “a rising tide lifts all boats.”

Which is not to take anything away from VIZIO, which has indeed built up a very well done FAST in WatchFree+ while doubling down on improving the overall user experience of their SmartCast platform.

UX is indeed the final piece, and one that often seems to provide Wall Streeters with that “aha moment” — the fact that OEMs can make their FAST the centerpiece of their on screen experience, the first thing users see when they turn on the TV.

That then creates yet one more revenue stream, one where the OEM can sell advertising to other media companies to promote their apps and shows.

Which is why we’ve been saying the TV OS wars are so important right now.

What You Need To Do About It

If you are Team VIZIO, take a bow. You’ve faced down the naysayers, built up a strong and profitable business and added value for customers and advertisers alike while helping to make the Smart TV Ecosystem a thing. 

This is going to be a valuable skill set to have as the technical features of TV sets continue to even out and intangibles like user experience become a key selling feature and thus a key asset in the TV OS wars.

If you are an investor, hopefully the reason why companies like VIZIO, LG, Roku  and Samsung have invested heavily in ad-supported content plays is becoming clear to you now. Their competition in the OS wars will be tech companies like Amazon and Google and white label software companies like Xperi and Foxxum. And they can’t win if they’re not playing.

If you’re a consumer, this is all good news for you. One often unheralded side effect of the emergence of the Smart TV Ecosystem is that it’s kept TV prices down to the point where they’re often the least, rather than the most, expensive screen in the house.

2. Search and Discovery Remain An Issue

Talk to any NIRP (Non-Industry Regular Person) about streaming and chances are the difficulty of finding the shows they want to watch will come up.

Not finding what to watch as in recommendations— though that can be an issue too— but rather, finding the shows they are pretty sure they have access to or (worse still) have actually started watching but can’t seem to find again.

The reasons for this are legion, ranging from poorly designed app interfaces to streaming services not wanting to provide a direct (deep) link to their shows that bypasses their main interface.

Its continued presence as a key consumer issue was at the top of our 2023 Fearless Predictions list, and so it was heartening to see an actual study from TiVo that confirmed this was indeed the case.

I mean who doesn’t like to be proven right?

Why It Matters

Once upon a time, in a long forgotten kingdom with just three big TV networks, there was a magazine called TV Guide that let viewers know what was going to be on TV that week along with little synopses of all the shows.  

Now granted, you had to physically pick up the remote to change the channel to the show you wanted to watch (or, in even earlier times, turn the channel dial). But it was efficient and the people were happy with the blessings the TV Gods had bestowed upon them.

Fast-forward to peak cable days and the TV Guide was replaced by an on-screen electronic program guide, which was usually confusing AF and appeared to be designed by a freelance team of Staasi interrogation officers. 

That said, there was usually someone in the house who could figure it out, and worst case scenario, you could just flick though all 487 channels, usually in groupings of 15 or 20 at a time.

Compare that to streaming where it often seems like they (whomever “they” might be) just don’t want you to find your show.

Take HBO Max, where, like many of you no doubt, I am watching The Last Of Us.

You would think that since The Last Of Us is the only thing I have watched on HBO in 2023, that the latest episode would be front and center every time I launch the app.

But no, I have to scroll past any number of rows and hero tiles before I get to the row with The Last Of Us. (That’s if it remembers I’ve been watching the show at all, but that’s another column…)

The thing is there are consequences when things like that happen regularly across the streaming spectrum.

• People decide that maybe there are advantages to cable TV after all.

• They decide not to watch that series their sister recommended because they can’t seem to find it.

• They go to Google to find it, thus giving Alphabet even more useful data.

• They turn to FASTs because at least they have something resembling a program guide.

• They turn to TikTok because it doesn’t need a program guide, just an algorithm.

There’s a lot more to that list, but it should give you a good take on why this is an actual problem.

What You Need To Do About It

If you are one of the SVOD providers, it’s time to get out of your own way. Yes all that data is valuable, but so is keeping people on your platform and keeping them as subscribers. 

If you keep making it difficult for people to find the shows they want in order to push the shows you want them to want, they’re going to rebel.

It’s not like there aren’t a whole passel of other options out there.

If you are an OEM or interface provider, keep pushing back against streaming services that make it difficult for you to create a simple, easy to use guide based on which services a viewer subscribes to.

If you are Alphabet, hope that none of this catches on and consumers continue to flock to Google to search for shows. Make sure to use that information to inform your Google TV interface.

If you’re a consumer, keep complaining. Eventually someone will figure out there’s a financial advantage to be had in listening to you.

3. Odds And Ends

Remember Clubhouse, that weird audio chatroom/conference thing that all the Silicon Valley types were heralding as the New New Thing back in the early days of The Pandemic?

We were admittedly highly skeptical, dubbing it “Live Video 2.0” and it seems that Clubhouse may be on its last legs.

The lesson here is not so much that we were right (you should be used to that) but that once launched, tech takes a while to die off. It’s sort of proportional to how many breathless trend pieces it generates.

Speaking of trendy tech, why are people nodding along as TikTok says it is putting limits on teens under 18 and creating “parental safeguards” for those under 13.

Have you never been a teen? In case you’ve forgotten, they’re quite resourceful and a pop-up telling them they have been on for over an hour is going to be met with a prolonged eye-roll while the middle school crowd has been claiming to be 18 since they were in elementary school. (It’s not as if TikTok asks for a birth certificate) and I have no doubt most of them have created their own passwords to get those extra 30 minutes their parents are supposed to be approving.

It’s probably better than not doing anything at all but can we stop pretending this is going to have any real effect?