There’s a simple reason why your new smart TV was so affordable: It’s collecting and selling your data

Did you get a 4K/HDR capable TV this past holiday, perhaps on sale? Millions of Americans did.

caption
Did you get a 4K/HDR capable TV this past holiday, perhaps on sale? Millions of Americans did.
source
REUTERS/Jeff Haynes

  • The vast majority of televisions available today are “smart” TVs, with internet connections, ad placement, and streaming services built in.
  • Despite the added functionality, TV prices are lower than ever – especially from companies like TCL and Vizio, which specialize in low-cost, high-tech smart TVs.
  • There’s a simple reason that smart TV prices are so low: some TV makers collect user data and sell it to third-parties, which can offset the cost.

Massive TVs with razor-thin frames, brilliant image quality, and streaming services built-in are more affordable than ever thanks to companies like Vizio and TCL.

If you want a 65-inch 4K smart TV with HDR capability, one can be purchased for below $500 – a surprisingly low price for such a massive piece of technology, nonetheless one that’s likely to live in your home for years before you upgrade.

But that low price comes with a caveat most people don’t realize: Some manufacturers collect data about users, then sell that data to third-parties. That data can include what type of shows you watch, which ads you watch, your approximate location, and more.

The Roku TV interface on TCL's smart TVs comes with a prominent ad placement on the home screen.

caption
The Roku TV interface on TCL’s smart TVs comes with a prominent ad placement on the home screen.
source
TCL/Roku

A recent interview on The Verge’s podcast with Vizio CTO Bill Baxter did a great job illuminating exactly how this works.

“This is a cutthroat industry. It’s a 6% margin industry,” Baxter said. “The greater strategy is I really don’t need to make money off of the TV. I need to cover my cost.”

More specifically, companies like Vizio don’t need to make money from every TV they sell.

Smart TVs can be sold at or near cost to consumers – which is great for consumers – because Vizio is able to monetize those TVs through data collection, advertising, and selling direct-to-consumer entertainment (movies, etc.) – which is less great for consumers.

Or, as Baxter put it: “It’s not just about data collection. It’s about post-purchase monetization of the TV.”

And there are a few different ways to monetize those TVs post-purchase.

On TCL's Roku TVs, users can opt out of the full scope of ad tracking. How much you're able to block yourself from data tracking varies by TV manufacturer.

caption
On TCL’s Roku TVs, users can opt out of the full scope of ad tracking. How much you’re able to block yourself from data tracking varies by TV manufacturer.
source
Roku/TCL

“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,” he said.

It’s those additional forms of revenue that helps make the large, beautiful smart TVs from companies like Vizio and TCL so affordable.

Without that revenue stream, Baxter said, consumers would be paying more upfront cost. “We’d collect a little bit more margin at retail to offset it.”

The exchange is fascinating and worth listening to in full – check it out right here.