- TV component costs are rising, squeezing already thin margins
- Report says smart TV advertising helped stave off price hikes
- He also says fierce competition from retailers has helped keep prices low.
The price of almost everything electronic has skyrocketed in recent months, with one 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 ever more expensive electronics, which is ideal for anyone looking for a new TV for the World Cup.
The problem is that it’s because TV companies are keeping their prices artificially low when instead they’re looking to make money from advertising on your screens.
This is according to market research firm Omnia (via Digitimes), which says North America provides a particularly clear example of this trend. Because competition among retailers is so fierce in the television market, television companies are under intense pressure not to raise their prices.
And since TV profit margins have been so low for several years anyway, that means they’ve been forced to find another source of revenue: advertising.
We were therefore confronted with a classic double-edged sword. The TV makers’ decision to throw more ads at you hasn’t made anyone happy; but that means they were able to deal with the rising component prices without passing it on to us.
What is the state of the television market?
FIFA World Cup TV buyers contributed to the surge in TV shipments: they were up 6% year-over-year, according to market research firm Omdia.
Almost everywhere except mainland China, sales increased: 13% in Asia and Oceania, 12% in Latin America and 11% in North America. Omdia suggests that part of this shift is the result of Chinese companies aggressively targeting overseas markets to offset slowing domestic demand.
However, this increase in sales comes against a backdrop of ever-higher and higher costs. So businesses continue to move toward what Walmart calls a “content-to-commerce” platform.
By tying the streaming business to advertising on its Vizio and Onn TVs platform, the company aims to generate recurring revenue through advertising rather than relying entirely on hardware sales.
When you sell a TV, you only get paid once. But you can sell ads on this TV forever. And that’s why companies are willing to absorb a few small extra costs now, in exchange for making sure you choose their TVs and that they can make long-term money from you in the future.
The downside? Well, if component prices continue to rise, TV companies might conclude that they can always give you more ads in more places… but in the meantime, you’re at least buying a new giant screen.
Are you planning to buy a new television?
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