- TV component costs are rising, squeezing already thin margins
- Report claims advertising on smart TVs has helped prevent price hikes
- He also says that fierce competition from retailers has helped keep prices low.
The price of almost everything electronic has skyrocketed in recent months, with one particular exception: televisions. And a new report says there’s good news and bad news about that.
The good news is that TVs have really bucked the trend of increasingly expensive electronics, which has been ideal for anyone looking for a new TV for the World Cup.
The bad thing is that it is because television companies keep prices artificially low while they make money from advertising on screens.
This is according to market research company Omnia (via Digitimes), which states that North America offers an especially clear example of this trend. Because competition between retailers is so fierce in the television market, television companies have been under intense pressure not to raise their prices.
And because TV profit margins have been so low for several years, that means they’ve been forced to look for a different revenue source: ads.
So we’ve been experiencing a classic double-edged sword. The pivot by television manufacturers to throw more ads at you hasn’t made anyone happy; but that means they have been able to weather component price increases without passing it on to us.
What is the state of the television market?
People buying TVs for the FIFA World Cup has helped boost TV shipments: They are up 6% year over year, according to market research firm Omdia.
Virtually everywhere except mainland China saw sales growth: 13% in Asia and Oceania, 12% in Latin America and 11% in North America. Omdia suggests that part of the shift is a result of Chinese companies aggressively targeting overseas markets to offset slowing domestic demand.
However, this increase in sales occurs in a context of increasing costs. That’s why companies continue to move toward what Walmart calls a “content-to-commerce” platform.
By tying streaming activity to advertising on its Vizio and Onn TV platform, it aims to generate recurring revenue from advertising rather than relying entirely on hardware sales.
When you sell a television, you only get paid once. But you can sell ads on that TV forever. And that’s why companies are willing to absorb some small additional costs now, in exchange for ensuring that you choose their TVs and they can make long-term money off of you in the future.
The downside? Well, if component prices continue to rise, TV companies may conclude that they can always show you more ads in more places… but in the meantime, at least buy a nice new big screen.
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