Taking the Smarts Out of Smart TVs Would Make Them More Expensive

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.

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