Taking the smarts out of smart TVs would make them more expensive


CES is always a show about the future of TVs, and this year is particularly interesting. Not only are 4K HDR TVs better and cheaper than ever, but the software side of things is opening up in unprecedented ways. Not only are Google Assistant and Alexa control everywhere, but Apple’s embracing the TV industry for the first time: Vizio and LG TVs will support AirPlay 2 and HomeKit, while Samsung TVs will get an iTunes Movies & TV app, as well as AirPlay 2 support.

I just hung out with Vizio CTO Bill Baxter on the Vergecast, and the conversation was wide-ranging and illuminating. Vizio just announced its 2019 lineup of 4K HDR TVs, and they’re as impressive as ever: there’s brighter, bolder colors from quantum-dot technology for the M- and P-series TVs, and the new flagship P-Series Quantum X line has 480 local dimming zones and a wild peak brightness of 2,900 nits. In terms of pure hardware, these are some of the best 4K HDR TVs I’ve seen yet.

We talked about all that, of course, but we also talked about the future of Vizio’s SmartCast platform, what it took to add AirPlay 2 and HomeKit to the mix, why it’s important for TVs to support multiple smart home platforms, and where the future of home control is going. (Hint: remotes aren’t going away, but voice control and devices like the Google Home Hub are a big part of the future.)

And we definitely talked about the pervasive ad tracking that all smart TVs do — especially after I noticed the new Vizio P-Series in my parents’ house seems to ping the network an awful lot. Baxter told me that he thinks Vizio is the industry leader in disclosing what tracking is happening and letting users opt in or out during setup, and that he’s fine if people choose to turn it off. But he was also clear that TV companies are in a cutthroat business, and that companies like Vizio would have to charge higher prices for hardware if they didn’t run content, advertising, and data businesses.

You can listen to the whole conversation on the Vergecast, and I’ve excerpted a bit below. And stay tuned for more Vergecasts and Vergecast interviews from CES all week.

This interview has been lightly edited for clarity.

So I have a Vizio P-Series TV, I put one in over the holidays. And it hits the network 10x more than any other device on the network. And I’m wondering: is that all tracking? Is that getting the Cast interface [downloaded]? Is it just caching PlutoTV? What’s going on there? Because I think that’s a big question.

I think that’s a fine question. I think you know that Vizio has been pioneering privacy and active viewing data disclosures for the last several years, and we actually lead the industry in those disclosures. It could be a bug, honestly. It’s software. There could be a bug where maybe the IoT stack that’s supposed to be telling the cloud that I’m turned off is doing it all the time. I actually do not know, but I’d love for someone to call it into customer service.

He’s pointing at me. He would love me to call customer service. I think as smart TVs get more ubiquitous, as more things go on the network, this is the question. What are they doing in the background? What are they watching? What data is shared?

Yep.

And now you have multiple giant platforms with very different ideas like Google and Apple. You support them both. Yet they have radically different ideas about what data should be collected. How do you see yourself sitting in the middle of that? And then you are in fact collecting your data. You do run [automatic content recognition].

Absolutely.

So it’s what the glass on the TV sees, just to be really straight. Whatever the TV sees.

If the user has gone through the setup process and opted in to content recognition, then we will enable that for certain use cases, because there are restrictions, and we don’t want to violate the customer’s privacy rights and we certainly anonymize that data and we don’t try to, in any way, infringe on their privacy.

Having said that, we are the industry leader in those disclosures. And I think you’ll see a lot of changes in the privacy landscape over the next couple years. There’s California law coming online in 2020, which we are way ahead of. We’ve already gone down the path on that and I think that will portend what happens at the national level.

I’m in front of all TVs and we’re talking about national data regulation. That’s not usually what I talk about with TV vendors.

Look, when we do automatic contact recognition we give the industry a real consumer benefit. And I think that’s sometimes lost in the whole story.

If you opt it in and then we can translate that into better serving you in many different ways. And so there are real benefits. And so you won’t see us shying away from trying to continue down that path, but you will also see that we will continue to lead the industry in terms of how consumers can find out what we’re collecting, specifically what we collected, what we’re going to use it for, and how they can turn it off if they don’t like it. We’ll continue to push the envelope on that and make sure that customers are protected.

I guess I have a philosophical question. You guys are committed to low price points and you often beat the industry at those price points. Can you hit those price points without the additional data collection that TV does if you don’t have an ad business or a data business on top of the TV?

So that’s a great question. Actually, we should have a beer and have a long, long chat about that.

So look, it’s not just about data collection. It’s about post-purchase monetization of the TV.

This is a cutthroat industry. It’s a 6-percent margin industry, right? I mean, you know it’s pretty ruthless. 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. They live in households for 6.9 years — the average lifetime of a Vizio TV is 6.9 years. You would probably be amazed at the number of people come up to me saying, “I love Vizio TVs, I have one” and it’s 11 years old. I’m like, “Dude, that’s not even full HD, that’s 720p.”

But they do last a long time and our strategy — you’ve seen this with all of our software upgrades including AirPlay 2 and HomeKit — is that we want to make things backward compatible to those TVs. So we’re continuing to invest in those older TVs to bring them up to feature level comparison with the new TVs when there’s no hardware limitation that would otherwise prevent that.

And the reason why we do that is there are ways to monetize that TV and data is one, but not only the only one. It’s sort of like a business of singles and doubles, it’s not home runs, right? You make a little money here, a little money there. You sell some movies, you sell some TV shows, you sell some ads, you know. It’s not really that different than The Verge website.

One sort of Verge-nerd meme that I hear in our comments or on Twitter is “I just want a dumb TV. I just want a panel with no smarts and I’ll figure it out on my own.” But it sounds like that lifetime monetization problem would prevent you from just making a dumb panel that you can sell to somebody.

Well, it wouldn’t prevent us, to be honest with you. What it would do is, we’d collect a little bit more margin at retail to offset it. Again, it may be an aspirational goal to not have high margins on our TV business because I can make it up downstream. On the other hand, I’m actually aggregating that monetization across a large number of users, some of which opt out.

It’s a blended revenue model where, in the end, Vizio succeeds, but you know, it’s not wholly dependent on things like data collection.