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Taking the Smarts Out of Smart TVs Would Make Them More Expensive (theverge.com)
In a wide-ranging interview, Nilay Patel of The Verge speaks with Bill Baxter, chief technology officer of Vizio, about what the company thinks of some TV vendors adding support for Apple's AirPlay 2, and other things. A remarkable exchange on the business of data collection and selling: Nilay Patel: 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?
Bill Baxter: 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.
Patel: 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.
Baxter: 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.
Bill Baxter: 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.
Patel: 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.
Baxter: 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.
How much money DO thwy make after purchase?
If it's 200 on a 1200 appliance, I'll gladly give yoi 1500 to just give me a dumb panel and fuck off.
My background is in TV SoCs, so I can definitively say that this whole industry has been a very low margin business for years. Mr. Funai, who ran the Funai brand that owns Sanyo and Magnavox brands, used to negotiate with us and was taking off fractions of pennies for certain features. That was over a decade ago...
/.ers, will simply not connect our TVs to a network and use our player of choice, like Kodi on a Pi3 or HTPC, plus an antenna for the tuner. Today's ATSC tuners will go the way of the dodo, and in a few years they will be relegated to having a 16:9 SD-ish signal of a limited number of channels for a few years until they shut that off and ATSC 3.0 becomes your only choice. Even tuners will not be protected long-term, as various sub-committees in ATSC, EBU and others are talking about having a 5G modem in displays and set-top boxes to collect viewer information using some IoT stack even when not connected to the user's network. It won't matter if there isn't PII, as statistical correlation and deep learning with this and other data (e.g. mobile network location) will be enough to pinpoint not only your house, but who is viewing what at a given time.
SoCs have changed a lot since those days (waving at DivX). Yet the most important features of the last decade driving increased margins from a pure display perspective are HDR / wide color gamut, quantum dot and OLED, and even those TVs are starting to become more "mainstream" in some respects.
The other half of this is streaming services, and this is what modern SoCs can finally provide. While boxes like Roku were predicted to go the way of the dodo and haven't, most brands have an app platform that supports not only streaming media, but analytics (read: data collection) as well. Some set-top boxes / streaming players (and I increasingly suspect TVs) have microphones to collect ad impression information for advertisers, but the terms controlling this data collection will be buried in some contract of adhesion aka EULA you click through to get access. Even Android phones going by Cast devices or Apple phones going by AirPlay sinks can and often do collect this information today for Google/Apple. Remember that Vizio was already caught in a scandal fingerprinting image buffers once a second and sending that to third parties, so the flippant attitude of the interviewer is both humorous and frightening.
What the interview doesn't discuss is how far this will actually go. I, like many
As frightening as all of the above may be, it means we need to be vigilant. Security researchers need to keep on top of these privacy violations and monitor not only network traffic but wireless as well. When the 5G IoT data collection really starts rolling out, we'll have to look at the FCC filings for the devices and see which have these radios in them. I hope it doesn't get to the point where I have to start cutting traces and clipping MMCX antennas out of a display, but I'm ready to do it. We need to use privacy enhancement tools on more open platforms and at low levels of our home networks and reject the closed ecosystems and control of embedded devices. Most importantly, we need to be very vocal and very public in calling out privacy violators. Everyone is trying to establish economic rents, but it can't be at the expense of individual privacy simply because the inevitable data breaches will inevitably expose too many of us to unwarranted public scrutiny.
It seems to be part of a massive shift in the population as a whole. Have you watched any music videos in the last couple of years? Scenes don't generally last for more than a few seconds. Sometimes it's all of a second. This has started to pick up steam across all of media, where it's chop, chop, chop. Cutting from one shot, one idea, one talking point to the next.
I think social media helps fuel this fire of hyperactivity and ADD. Smart phones are a blast furnace for it. I'm constantly blown away by how many people let everything on their phone notify them of everything. It's a constant ding, ding, ding, pay attention to me! No me! No, over here! Pavlov would be having a field day doing research.
A sizable percent of the population no longer seems capable of having a conversation over a beer. I don't know how we fix that. I hope it's just the growing pains of the switch to the internet and hyperconnectivity, and that we'll figure it out in time. Note the other /. story where the bulk of fake news sharing is done by old people who didn't grow up with the internet - seems like the kids who did are far less trusting. I'm hopeful that kids growing up in the Pavlovian new world we have can see the impact it has on their parents, and realize that they need to take steps to prevent that.
We really need to get back to a place where we can have deep, introspective conversations about complicated topics. That's the only way we can really make progress in the world.
Velociraptor = Distiraptor / Timeraptor