CES Proves Advertising’s Future Will be Shaped by Manufacturers

Streaming services get the hype, but hardware still controls content discovery.
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"This model is dependent on manufacturers working closely with the media publishers, but content discovery is controlled by the hardware, and that goes as far back as the beginning of TV broadcasting itself." -Ashwin Navin, Samba TV

Ashwin Navin, Samba TV

Ashwin Navin

CES is now a must-attend event for media companies. Why? CES offers us a view into the future, showcasing cutting edge technology products that become household fixtures in the new year. Device manufacturers and media companies have a symbiotic relationship, because these devices are only as good as the content available, and CES is the meeting ground for these two industries. As a result, media and advertising companies have pushed their way onto the CES stage, evidenced by the founders of yet another subscription streaming service, Quibi, delivering a coveted keynote presentation, along with announcements from Apple TV+, Disney+, HBO Max and Peacock leading up to and delivered at the show.

Quibi joins a long list of streaming services fighting the war for consumer attention against the likes of YouTube, Netflix, Hulu, and Amazon Prime Video all of which have already redefined how consumers watch TV with billions of dollars in content development, platform proliferation and marketing. It’s easy to see why CES is so central to the media business: TV audiences don’t exhibit the same viewing behaviors of the 20th century and the battleground for consumer attention has extended to every screen that we use throughout the day.

Despite all these signs, you’d be wrong in thinking that streaming video behemoths will control the future of television themselves. What CES made clear is that the TV manufacturers are actually going to have as much of a role in shaping what advertising looks like, how it’s delivered, and how it’s bought and sold in the coming decade.

This model is dependent on manufacturers working closely with the media publishers, but content discovery is controlled by the hardware, and that goes as far back as the beginning of TV broadcasting itself. Whether it’s historically zapping “channel up” and “channel down,” or modern developments, like integrations with the TV UI, a TV search box, or even a dedicated remote control buttons pointing directly to a particular app like Netflix, manufactures are the gateway to all content, and Smart TV makers are putting them in position to get a piece of the revenue from content and advertising and collect extremely valuable viewing data from the users themselves.

This is the untold story, overshadowed by the hype around services like Quibi. Originally code-named “NewTV,” the service is differentiating itself with snackable, 5-minute videos designed for mobile phones. Quibi seems to be running against the grain, trying to challenge YouTube’s dominance while all the market growth is actually in long-form video. A target in Ricky Gervais’ merciless Golden Globes monologue, The Irishman on Netflix is nearly three and a half hours long, but its cultural cachet is far greater than any five-minute clip or viral TikTok video. We are somehow managing to squeeze more and more video into our lives, and what we’re watching is increasingly long-form, episodic video -- addictive and binge-worthy. Viewers may be watching content everywhere, but advertisers’ best prospects lie in integrating with this long-form content.

That’s one reason why the entire manufacturing business is enamored by the Roku juggernaut. Once a purveyor of cheap streaming boxes, Roku is now a $16 billion TV operating system with integrated advertising. It is absolutely clear that Roku is in a driving position to shape the future of TV advertising, leveraging the capabilities of the Smart TVs they control. All of the non-Roku manufacturers have taken notice and now want their piece of the pie, including the other operating system providers in the space, Amazon and Google.

As a result, manufacturers will make continued investment in services that transform the viewing experience and business model for TV. This includes ongoing growth in new apps with branded buttons on remotes, paid for by media companies, as well as new AI technologies to assist consumers in content discovery and personalization, all tied back to viewership data and a tightly integrated advertising model.

This activity highlights a story that’s rarely told at CES, amid the glitz and glam of 8K resolution and flexible displays. The truth is that TV sets are subject to incredibly high price deflation, and that trend isn’t slowing. As the business model for content (advertising, subscriptions, payments and analytics) gets intertwined with the hardware, manufacturers will very soon be able to reduce their hardware prices to below cost, knowing that they can recover the difference through new revenue streams.

Two-thirds of viewers are willing to watch ads in exchange for free content, and as subscription fatigue sets in, viewers will likely embrace the combination of lower-priced TV set and free content in exchange for watching ads. In fact, this model has already caught on in markets like China, where TVs have been subsidized by content, advertising for years (replacing the government subsidy that launched the electronics industry and proliferation of TVs in domestic China).

This ushers in a new era of advertising that gives viewers what they want: fewer ad breaks than linear TV, and enough ad support to greatly reduce the cost of the monthly subscription, or eliminate it completely. The new ads are more targeted and personalized, tied back to viewing habits, matched to a household’s interests while upholding privacy fundamentals. And if it comes with lower prices for the best in-home display technology, it’s a huge benefit to the consumer and the companies trying to reach them.

By playing a more significant role in the content business, manufacturers are inevitably going to play a critical role in how TV advertising looks and feels like in the 2020s. As Smart TV prices drop, viewers will have more attractive price points, as well as a less-frustrating ad model that finally breaks the 20th century linear model of 12 minutes of irrelevant ads broadcasted for every hour of content. It’s safe to say that CES foreshadows the extinction of that business, and we should be thrilled about it.

Samba TV is a leader in global TV data and analytics.