That Hisense 55-inch 4K LED flat screen Smart TV with built-in Roku for $349 sounds like a great deal, doesn’t it?
This isn’t some “Black Friday” special or a “scratch and dent” fire sale, this is the regular price. At some retailers, you might even get a special offer – I’ve seen this model sell for as low as $299. Want to go even lower? Best Buy’s Insignia-brand model retails for a bit cheaper. Prefer a big-name brand? Samsung, Sony, VIZIO, and others all offer similar models in the same price range.
But if you buy one of these today, you might be disappointed. A new wave of Smart TVs is on its way from Xiaomi and Huawei later this year that are reported to cut that price by more than half. That’s right, these new 55-inch 4K LED Smart TVs might start to approach the $150 mark. At some point in the future, we could see a scenario in which the Smart TV comes free as part of a package of “cable” or “streaming” services. Smartphones use that pricing strategy today. Free Smart TVs might arrive as early as 2020.
Pretty cool, huh? Wouldn’t you like to pick up a new 55-inch flat screen for the price of a nice dinner and bottle of wine? Low-cost manufacturers are already seeing success in the Indian market; if the reports are true, the rest of the world doesn’t have long to wait.
I can almost hear my dad…
If it seems too good to be true, it probably is.
He’s right. I intend to show you just how much you’re paying for a Smart TV.
Let’s start with a basic rundown of the critical features most people look for in a new television:
- Screen size: We can almost stop the list right here. When surveyed, buyers talk about additional features, but the truth is that most people make their buying decision based on the measurement of the screen size (measured diagonally from one corner to the opposite corner). The bigger the better – up to a point. In practical terms, the television needs to fit in your car or truck (or you need to be comfortable paying a delivery fee) and it needs to fit on your wall. Those buyers will say they bought that monster screen so that they can stay home instead of going to a theater, but that’s usually not the case. Heavy entertainment users (most Americans) do both. The actual reason is quite simple: People buy “big” to impress their friends and neighbors.
- Screen resolution: This is the second most sought-after feature. Resolution is essentially a measure of picture quality. The most common measurement is the number of “pixels” on the screen, and here’s where it gets a little confusing:
- 480p SD: Standard Definition, or 640 pixels wide by 480 pixels tall. You’ll have trouble still finding one of these models even if you wanted one.
- 780p HD: This is the first so-called “High Definition” standard, with dimensions of 1280 pixels wide by 720 pixels tall. These are the “cheap” HD screens.
- 1080p HD: Often (confusingly) called “Full HD” with dimensions of 1920 pixels wide by 1080 pixels tall. The average consumer can be forgiven for looking at the “1280 pixels” in the other HD standard and believing that was “more pixels than” the 1080p HD model. Marketers aren’t always clear on which dimension they’re referring to, as we’ll see.
Okay, watch what happens now. It’s a little marketing trick. Instead of using the vertical pixel dimension, marketing switched to using the horizontal pixel dimension. That’s not necessarily inaccurate, but it’s not very clear either.
- 4K Ultra HD: If we were using the same standard, 4K would be called 2160p HD…or 1080p HD should really be called 2K. Confused? Most people are. But in practical terms, with dimensions of 3840 pixels wide by 2160 pixels tall, 4K is often clear enough to see nose hairs on your favorite actors.
- 8K (Superlative TBD) HD: Still rare, these screens have dimensions of 7680 pixels wide by 4320 pixels tall. Get ready for a journey past the nose hairs and into the nasal cavity. How about “Nasal HD”? No?
The final confusing bit is the relationship between screen size and resolution. A smaller 4K screen will appear clearer to your eyes than a very large 4K screen. Same number of pixels, in a smaller surface area, equals sharper appearance. That’s why you can get away with 1080p HD on the smaller screens and they look just fine…but the larger screens appear to benefit more from the higher resolution (this is called “pixel density”). And yes, television wonks will wax philosophical about signal bandwidth, image contrast, and color quality, but most people can’t tell the difference. (Marketing loves the wonks. You should be suspicious.)
Everything else falls down the list quickly. Almost 80% of the purchase decision is made based on screen size and resolution. Other factors matter, but much less so. Different brands use minor differences in port counts, sound system choices, and mounting options in an attempt to separate themselves in your mind. But once your TV is mounted to your wall, size and resolution drive your enjoyment. Everything else is trivial.
I’ve spent time explaining the basics of television marketing to highlight an important problem: Both of the key driving factors in television purchase selection (screen size and resolution) have become commodities, but we’re still vulnerable as consumers to Smart TV marketing that tugs at our egos and confuses rational decision-making.
It gets worse.
This commoditization puts tremendous pressure on less-critical factors in the buying decision, encouraging manufacturers to resort to gimmicks (curved screens) and confusing marketing (blacker blacks) to drive sales.
What’s more, as retail prices continue to drop, the price you pay as a consumer for that new Smart TV barely covers the cost of the large screen, plastics, electronics, packaging, shipping, distribution, retailing, and marketing – if it covers it at all. At $150, it almost certainly does not.
But as the end consumer, why should you care? If a manufacturer wants to give me a Smart TV in exchange for a year of streaming service (that I would have bought anyway), why would I say no? The reality is that cheap Smart TVs are such a win for consumers, that we often don’t think much beyond the price.
We should start. Manufacturers are not in business to lose money. Profit has to come from somewhere. Let’s find out where.
I strategically failed to mention one more important features of modern televisions: Software. Specifically, Smart TV software.
Only 20 years ago, televisions didn’t use software in any meaningful sense. Yes, televisions have long since abandoned mechanical actuators to change channels (and therefore needed basic microprocessors), but the consumers saw little evidence of that software beyond crude on-screen displays. Software of that era simply needed to recognize whether the television was on or off, what channel you were on, your volume, and whether an external device was plugged in. In fact, most of the “software” came secondhand from your video game console, DVD player, cable box, or home audio system.
But televisions have come a long way, driven by competition from mobile devices. Manufacturers saw their share of home entertainment under threat from tablets and smartphones, as well as plug-in devices such as Roku, Apple TV, and Amazon Fire TV. Their flexibility (and competitive advantage) came from software, not necessarily better hardware.
Smart TV systems, in various forms, are the television makers’ answer to the iPad. You may not get all the iPad’s flexibility, but you get access to popular streaming services, a smattering of apps, and management of external devices (DVD players, Cable TV providers, on-demand content, and other gaming systems) – all on a huge, beautiful screen.
It’s not hard to understand why they would do that. Television manufacturers incur massive hardware development expenses, and then go through the trouble of getting the big screen into your living room, only to hand over the after-purchase revenue to someone else.
And that’s what this is all about: After-purchase revenue.
The television is the least of what you pay for in home entertainment.
With only a brief look at the average monthly bill for content coming through the television, we can see why television manufacturers might want to get in on that. Let’s start with the obvious costs and benefits – the ones you see on a monthly (or on-demand) bill:
- Cable or Satellite Service: $107/month on average – People might complain about cable television, but they still buy it, often because it’s bundled with other services (phone or internet) or because that is the only way to get access to popular programming (live sports is a common example).
- Streaming Service(s): $10-$15/month per subscription (many homes have two or more): Netflix, Amazon (part of a Prime membership), and Hulu are the big ones, but they’re not the only providers. YouTube also offers subscription services to avoid its advertising, and AT&T offers a plan as well.
- Movies and Pay-Per-View Entertainment: $20-30/month: Want to watch the latest movie? Don’t want to buy the DVD? You can buy it through iTunes for $10-$15. Most homes order 2-3 additional offerings each month.
Yes, some people have “cut the cord” and use streaming services in place of cable and satellite services, but many households use both. If we do the quick math, that’s more than $150 per month in entertainment services for an average home. (And we’re not counting internet connectivity and mobile phone plans.) That’s almost $2,000 each year. Now compare that to the falling retail price of the average Smart TV and you’ll understand the appeal of after-purchase revenue.
The real money isn’t in selling you a Smart TV, it’s in selling you entertainment.
But again, as the consumer, why should you care how much the television manufacturer makes?
When you use your Smart TV to access Netflix, you’re not paying your bill through Samsung. The Smart TV is simply a portal to organize these services, and you know Samsung needs to make money somewhere. As the consumer, you get the benefit of less clutter, fewer external devices, and an easier user interface. You might even get a discount on some of those streaming services.
What’s not to like?
In the modern television ecosystem, you’re not consuming entertainment, you are the entertainment.
Here is the point in the story we need to introduce you to Samba TV. It’s not the only such provider of television viewer data, but it’s the big one you may have heard of, mainly from this article last July.
In short, if you enable the Samba Interactive TV function on your Smart TV (and about 90% of people do), the company can track your viewing habits, aggregate that data, and sell that data to advertisers. Content providers and advertisers can then use that data – not only in its aggregated form – but also to deliver individualized programming recommendations and targeted advertising. With Samba, television manufacturers (finally) get a cut of the aftermarket.
You can almost hear marketing directors squealing with joy.
Let’s allow one to tell you herself, as described in the New York Times.
Citi and JetBlue, which appear in some Samba TV marketing materials, said they stopped working with the company in 2016 but not before publicly endorsing its effectiveness. JetBlue hailed in a news release the increase in site visits driven by syncing its online ads with TV ads, while Christine DiLandro, a marketing director at Citi, joined Mr. Navin at an industry event at the end of 2015. In a video of the event, Ms. DiLandro described the ability to target people with digital ads after the company’s TV commercials aired as “a little magical.”
That’s why the Smart TV is such a big deal. By centralizing all of your entertainment consumption activity, you also centralize all of your behavioral data. And there is a bigger market for your television viewing data than you might think:
- Content Optimization and Ratings Data: The days of the Nielsen set-top monitoring boxes are now painfully quaint. Why settle for a sampling of television viewers when you can gather all of the data from every Smart TV-enabled system? Content providers know not only how many people watched, but at what points they stopped watching, and even at what points they were unengaged with the content. That last one is the most important. Lack of “engagement” isn’t simply taking a bathroom break; actual engagement is more subtle than that. If you’re playing with your kids, you’re not paying attention to the programming.
- Product Advertising: Advertisers want to know if you’ve viewed their ads as well as how engaged you were – just like content programmers. But advertisers want much more than that. Instead of delivering advertising and hoping you make a purchase at some undetermined point in the future, advertisers want you to make the purchase immediately. Ideally, right on the screen. That’s the “magical” part DiLandro referred to.
- Improving Facial Recognition and Voice Algorithms: You may have wondered how your Smart TV knows you’re watching it and how much you’re actually paying attention. Here’s a hint: Many (most) of these new Smart TVs have both cameras and microphones built in. When you’re watching a modern Smart TV, the Smart TV is also watching you. Older versions could only tell if “someone was in the room,” but newer models can also track where you’re looking on the screen. With newer voice recognition systems, they also can tell if you’re discussion the program or advertising … or talking about something else. They use this data to improve how content (both entertainment or advertising) should be optimized for maximum consumption and conversion.
This data is worth billions. And we just gave it away for a cheap flat screen TV.
At this point, it’s fair to think all that monitoring might seem a bit creepy, but it’s not as though they didn’t tell you they were doing it. You can adjust the privacy settings to disable those Smart TV functions if you don’t want them. And who cares if television manufacturers are making money off your data? They’re delivering better programming and targeted advertising. That sounds like a win-win. What’s more, monthly fees from cable and streaming services are expensive enough. At least the Smart TV is getting cheaper.
It’s hard to argue with that logic.
In fact, you could argue (and many have) that better entertainment and better advertising are small prices to pay for an enhanced experience. The average person in the United States spends about 8 hours in front of the television each day. That surprises you, doesn’t it? You may have thought that computers, tablets, and smartphones have eaten away at that number – and for some segments of the population, they have – but on the whole, people of all generations enjoy consuming content on a big, immersive screen.
And now, finally, the technology inside the television is catching up with technology of the screen itself. What’s wrong with that?
Let’s set aside the issue of providing consent, and how difficult it is to read and fully understand privacy policies. That’s a separate issue, but it’s under your control.
I am going to ask you more difficult questions:
Do you consent to a Smart TV monitoring your children?
What about your kids using your Smart TV when you’re not at home (or when you’re out of the room)? Is it okay for advertisers to ask your children to buy a product they see on the screen? Are you aware of (and use) the parental control settings? Do they work as you would expect them to work?
Well, you say, that’s the parent’s job. I don’t want (or need) some intrusive regulation telling me how to raise my kids.
Okay. Let’s ask another question.
Do you consent to a Smart TV monitoring you in your hotel room?
Yes, that same technology exists in nearly every hotel room, and because that Smart TV is not your property, you have little control over its privacy settings. Wiretapping is illegal. Using the Smart TV is not.
Well, you say, the Smart TV is the hotel’s property. They can do what they want. I don’t have to stay at that hotel, and I don’t need to use the Smart TV.
Okay. Let’s ask another question.
What about when they companies violate their own policies about sharing and protecting your data?
We’ve seen this before: Last year, the Federal Trade Commission fined VIZIO $2.2 million for selling data on 11 million viewers without their consent starting in 2014. Samba TV skirts this situation by paying television manufacturers to pre-install its software, but it doesn’t sell the data, it sells targeted ads. That seems like an awfully fine line to walk. If internal controls fail at the company, or its servers are hacked, your data is at risk.
Well, you say. Now you’re being silly. That doesn’t happen that often, and those companies get caught. You can’t prevent all the bad stuff from happening. And besides, I have nothing to hide, so I don’t care if people know what TV shows I watch.
I don’t have to agree with you to respect your point.
But I’m not done asking questions just yet.
Are you willing to risk espionage from foreign governments?
To help explain why it’s not unfeasible to use Smart TVs for espionage, we need to revisit the biggest computing story in 2018. No, it wasn’t the launch of the iPhone Xs, or some new AI technology debuting at CES, it was a story about a tiny microchip in an obscure supply chain for ultra-fast server hardware. If you’re an IT professional, this was big news. Most people missed it.
Here’s the short version: California-based manufacturer Supermicro was an important part of the supply chain for several companies, manufacturing circuit boards for high-end, ultra-fast servers used by companies such as Amazon, Apple, and other major corporations (as well as US government agencies) to process huge volumes of data. Allegedly, buried deep in the circuit board was a tiny microchip – a chip that wasn’t supposed to be there, and that the Chinese People’s Liberation Army forced Chinese-based subcontractors to install – that opened a “backdoor” into the server from a remote location.
If it’s true, that’s data espionage. Plain and simple.
The entire story is fascinating. You should read it. Fortunately, impacted companies and agencies discovered the problem and eliminated it (allegedly, they won’t admit it). Predictably, Supermicro vigorously denied the reports. The story is ongoing. In the end, however, it doesn’t matter if it happened precisely as Bloomberg reported it or not. The idea is exposed.
So, let me ask my question a different way. Consumers in the United States alone own about 150 million Smart TVs. What if only one percent of those devices had a “spy chip” installed? That’s 1.5 million potential surveillance devices.
That doesn’t account for the possibility of hacking the Smart TV software – much easier, and far more likely. Research from the team at Consumer Reports (published in 2018) shows Smart TV software was vulnerable to hacking.
They allowed researchers to pump the volume from a whisper to blaring levels, rapidly cycle through channels, open disturbing YouTube content, or kick the TV off the WiFi network.
Researchers (white hat hackers, in this case) couldn’t extract information using these methods solely through the Smart TV interface. But many people use the same WiFi network for their phones and tablets as their Smart TVs. That increases vulnerability to software intrusions that come from elsewhere – say, clicking on a phishing email.
Fortunately, while Smart TV software may be vulnerable, there’s no evidence that hardware tampering has happened or that anyone has found a “spy chip” in a consumer television.
But absence of evidence is not evidence of absence.
What if your Smart TV was, unwittingly, a listening device for a foreign government? It makes Russian tampering with Facebook advertising seem quaint by comparison.
This is a big fucking deal.
Holy shit, huh?
You didn’t think you’d need to consider geopolitics while browsing for Smart TVs on the sales floor of your local Best Buy.
Sadly, in today’s ultra-connected world, we need to broaden our perspective. But luckily, there are a few easy things you can do today to help mitigate invasions of your privacy, while still accessing the entertainment you want.
- Learn the privacy settings on your Smart TV. This isn’t as easy as managing the settings on an Apple iOS or Google Android device. There are many Smart TV versions out there, and even more manufacturer-specific settings. You’ll need to find yours and understand them. Fortunately, the good folks at Consumer Reports have provided a starting point.
- Remove any unwanted/unused apps from your Smart TV. Just like your smartphone, any app on your Smart TV might be collecting data, even if you’re not using it.
- Be careful of gaming platforms, especially with kids. Microsoft, Sony, and Nintendo have solid protections in place, but many Smart TV-accessible games may not. Know what you kids are doing.
- Speaking of kids, learn the parental controls on the Smart TV too. Your kids cannot know the technology better than you do. Sorry, you’ll need to learn.
- Find the camera and microphone on your Smart TV. They’re usually described in the instruction manual so that you do not cover them. Cover them.
- Unplug your Smart TV when you’re not using it.
- Or if you’re not going to do that, have your Smart TV on a different WiFi network than your other devices – especially “listening” devices such as Google Home and Amazon Alexa, or home security systems.
- Is it about time to contact your representatives about GDPR-style legislation? What’s it going to take?
- Consider purchasing a Smart TV brand based in a country with a lot to lose from pissing off your home country. South Korea and Japan fall into that category for the United States. China, not quite so much. Although supply chains are global, and many of these manufacturers use Chinese sub-contractors, another (friendly) government provides an extra layer of vigilance.
Managing your own privacy is part of modern life. The tech companies won’t do it. They barely think humans as anything more than moist computers with a checking account. The Smart TV manufacturers won’t do it. They’ve finally entered the data race, and they’re hardly going to stop now. The advertisers won’t do it. They’re addicted to data – however they can get it. The media can’t do it for you. They only report what’s already happened (and by then, it’s too late). Your government can’t do it either. Even GDPR has holes, and even tight regulation can’t protect you from bad actors who simply break the rules and hide.
No, protecting your privacy is up to you.
That’s the price of entertainment.
About Jason Voiovich
Jason’s arrival in marketing was doomed from birth. He was born into a family of artists, immigrants, and entrepreneurs. Frankly, it’s lucky he didn’t end up as a circus performer. He’s sure he would have fallen off the tightrope by now. His father was an advertising creative director. One grandfather manufactured the first disposable coffee filters in pre-Castro Cuba. Another grandfather invented the bazooka. Yet another invented Neapolitan ice cream (really!). He was destined to advertise the first disposable ice cream grenade launcher, but the ice cream just kept melting!
He took bizarre ideas like these into the University of Wisconsin, the University of Minnesota, and MIT’s Sloan School of Management. It should surprise no one that they are all embarrassed to have let him in.
These days, instead of trying to invent novelty snack dispensers, Jason has dedicated his career to finding marketing’s north star, refocusing it on building healthy relationships between consumers and businesses, between patients and clinicians, and between citizens and organizations. That’s a tall order in a data-driven world. But it’s crucial, and here’s why: As technology advances, it becomes ordinary and expected. As relationships and trust expand, they become stronger and more resilient. Our next great leaps forward are just as likely to come from advances in humanity as they are advances in technology.
Thank you! Gracias! 谢谢!
Your fellow human.