Are Smart TVs keeping prices down because of user data collection?

Television technology continues to improve every year. Smart TVs are now the norm with their ability to play cable, stream services (such as Netflix, Hulu, and others), and even browse the internet. As television technology continues to improve, one would think that prices would steadily inflate, as well. However, this doesn’t seem to be the case. TV prices are dropping (relative to the tech they carry inside).

So what gives? It turns out, collecting and selling your user data is far more lucrative than selling TVs at higher prices.

How Smart TVs Collect Data

The fact that smart TVs can collect user data isn’t a new revelation. Last July, the NY Times reported how Samba TV forged deals with multiple smart TV manufacturers, including Sony, TCL, Philips, and more to place software on specific models to track users and their viewing preferences. Owners were encouraged to activate Samba Interactive TV during setup and in return for opting-in, viewers would receive “special offers” and show recommendations.

Once enabled, the software tracked everything displayed on the TV. This included networks and shows viewed, video games played, and ads watched. It also identified other devices that shared the TV’s internet connection.

How were companies using this data for their own benefit? Simply put, they were able to pay companies to place targeted ads on devices connected to the Samba interface.

This data tracking method is called automatic content recognition (ACR). Once ACR is activated, pixels are captured from whatever a viewer is watching. That data is then shared with the ACR software of the TV manufacturer, who can use it however they want.

ACR Controversy

ACR tracking and the “opt-in” offer has been heavily debated and scrutinized. Vizio paid a $2.2 million settlement to the Federal Trade Commission (FTC) and the New Jersey Division of Consumer Affairs in 2017 for allegedly collecting data from consumers and selling it to third parties without their knowledge or consent.

The case prompted Vizio and other smart TV manufacturers to evaluate and revamp their data collection and sharing practices.

Per FTC recommendations, companies were asked to provide viewers with an easy-to-understand explanation of what data was to be collected and how it was shared. They were also directed to give people an easy way to opt-in and consent or opt out.

With data collection and privacy issues plaguing Facebook users over the past year, some people are concerned about what sort of online data is being collected about them and how it is being used. It makes sense some TV buyers might be equally concerned about what kind of data is being collected and what is being monitored on internet-connected TVs.

Is there an Upside to Data Collection?

AI, home automation, and the ever-broadening IoT are arguably leading technology’s future. Billions of devices are connecting billions of people all over the world.

Technology is smarter and faster than ever before, and smart TVs are a big part of technology’s evolving landscape. Connecting to the internet, streaming movies, and playing games are some fun smart TV benefits. However, is there an upside to data collection for viewers?

Vizio CTO Bill Baxter addressed the subject during a Vergecast podcast at CES 2019. He admitted the company benefits from data collection. He also suggested there’s a consumer benefit that is “sometimes lost” in the discussion.

“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,” Baxter said. “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.”

Baxter didn’t elaborate on what some of those ways of “better serving” customers would be. It’s possible some customers might be more comfortable about ACR if potential “benefits” were more transparent.

Smart TV Data Collection Offsets Retail Price

When asked if Vizio could keep lower price points on TVs without data collection, a data business, or an ad business, Baxter said, “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?” he added, “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.”

So, there it is. The trade-off for a low-priced smart TV is software-driven data collection and if users opt-in, all sorts of unknown special offers await.

Given the overwhelming popularity of internet ads, one can only imagine just how “special” the offers will be.

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