Why TVs Have Become So Inexpensive

January 7, 2020

In this video, Cheddar explains the mystery of why TV's have suddenly dropped so sharply in price, when you're getting so much more bang for your buck.

FULL TRANSCRIPT

MALE_1: [MUSIC] On Black Friday 2006,

MALE_1: Best Buy advertised a steal of a deal for

MALE_1: this 56-inch Toshiba; $1,199.

MALE_1: And check out this 32-inch for a whopping $799.

MALE_1: In 2019, the same-sized TV can be found for

MALE_1: as little as $209 for

MALE_1: 55-inch and just $79 for the 32-inch.

MALE_1: And these aren't just regular old TVs,

MALE_1: these are smart TVs.

MALE_1: They're powerful enough to connect to the Internet,

MALE_1: stream shows, music, and more.

MALE_1: If we're looking at this from

MALE_1: a completely analytical perspective,

MALE_1: it doesn't really make any sense.

MALE_1: Larger TVs, higher resolutions,

MALE_1: more capabilities with Internet connectivity,

MALE_1: it should all add up to be more expensive.

MALE_1: Mass production and manufacturing improvements can

MALE_1: help bring down costs and they have over the years,

MALE_1: but this is a dramatic drop in price.

MALE_1: Generally speaking, you shouldn't be

MALE_1: able to get more for less,

MALE_1: especially when it comes to tech.

MALE_1: So how do TV manufacturers manage to drop the cost of

MALE_1: their units so substantially and

MALE_1: still make a profit? Well, it's simple.

MALE_1: They figured out another revenue stream.

MALE_1: [NOISE] TVs have always been kind of expensive.

MALE_1: Take this Westinghouse, the first colored TV

MALE_1: ever sold starting in 1954.

MALE_1: It had a 21-inch screen and cost $1,295.

MALE_1: Adjusting for inflation,

MALE_1: that same TV would cost over $12,000,

MALE_1: if it came out in 2019.

MALE_1: This was admittedly a luxury product

MALE_1: and not at all affordable to the masses,

MALE_1: but it didn't stay that way.

MALE_1: By 1964, colored TVs were being sold for

MALE_1: just $400 or over $3,000 in 2019 bucks.

MALE_1: Still a luxury product,

MALE_1: but a slightly more affordable one.

MALE_1: Part of the reason for that price drop is

MALE_1: that once manufacturers figure it out,

MALE_1: TVs were relatively easy to make,

MALE_1: consumers really only care that they

MALE_1: look good and sound decent.

MALE_1: So branding,

MALE_1: colors, all that stuff didn't matter too much.

MALE_1: This also meant that competition was much

MALE_1: stiffer and that helps drive prices down.

MALE_1: This trajectory paints a picture that holds

MALE_1: up for most TVs throughout history.

MALE_1: The coolest, newest TV is

MALE_1: extremely expensive until the companies can get

MALE_1: enough fabrication facilities to

MALE_1: produce that particular type of

MALE_1: television at a level that is cost effective to them.

MALE_1: Then they drop the prices down

MALE_1: just enough to get the masses on board,

MALE_1: while still maintaining a high enough profit margin

MALE_1: to make it valuable for them.

MALE_1: This is the way things were for a long time,

MALE_1: but it didn't stay that way.

MALE_1: In 2007, The New York Times

MALE_1: ran an article that suggested that

MALE_1: manufacturers make

MALE_1: approximately 20 percent profit margins

MALE_1: on each individual TV.

MALE_1: Besides Costco because they had

MALE_1: a generous return policy

MALE_1: which ended up cutting their margins in half.

MALE_1: But in 2019, those profit margins

MALE_1: have dropped down to just six percent,

MALE_1: according to the chief technical officer at Vizio.

MALE_1: Six percent is minuscule.

MALE_1: It's the kind of profit that would be

MALE_1: unsustainable in keeping a business alive,

MALE_1: if that's all they were making.

Male 1: But at a certain point,

Male 1: manufacturers realized that isn't

Male 1: all they needed to be making.

Male 1: They didn't need to get you

Male 1: to spend a lot of money on the TV,

Male 1: they just needed to figure out how to make

Male 1: money once you already had a TV.

Male 1: And if TVs were affordable enough

Male 1: that everyone could get one,

Male 1: then they'd be able to maintain a long-term business.

Male 1: After all, people usually keep their TV for 6.8 years.

Male 1: And so it's better to have

Male 1: a steady stream of revenue than a

Male 1: one-time hit every 6.8 years.

Male 1: Enter Smart TVs, the turning point of the industry.

Male 1: For consumers, smart TVs are

Male 1: the most convenient way to go when purchasing a TV.

Male 1: Seventy percent of Americans have

Male 1: one or more streaming services.

Male 1: With Smart TVs, those are built-in,

Male 1: you don't need to buy a Google Chromecast,

Male 1: Apple TV, or an Amazon Fire Stick.

Male 1: You just get your TV and it's off to the races.

Male 1: You even get YouTube. So you could be watching

Male 1: me on your TV right now.

Male 1: In 2018, 37.2 percent of households had smart TVs,

Male 1: 16 percent more than the year before.

Male 1: And this trend is expected to continue growing

Male 1: because smart TVs are cheaper than ever.

Male 1: If you've recently been in an electronics store,

Male 1: you know that the only types of TVs that

Male 1: brands are selling these days are Smart TVs.

Male 1: So how exactly do they make

Male 1: a steady stream of money

Male 1: after you've already purchased the TV?

Male 1: Well, there are a few things.

Male 1: But quite simply, they track everything you do.

Male 1: While you're watching the TV,

Male 1: the TV is also watching you,

Male 1: whether that's launching an app,

Male 1: watching cable or a streaming service,

Male 1: or even a DVD, the TV knows.

Male 1: It uses automatic content recognition to

Male 1: figure out what you're watching

Male 1: no matter what you're watching.

Male 1: [MUSIC] It reports that data back to

Male 1: the TV manufacturer and to some third party companies.

Male 1: One study by Northeastern University

Male 1: and Imperial College in

Male 1: London found that almost all TV sent data to Amazon,

Male 1: Facebook, and Google's ad services.

Speaker 10: [MUSIC] It also found that that every TV sends data at

Speaker 10: Netflix even if you don't

Speaker 10: install or even activate the app.

Speaker 10: TV manufacturers have suggested that they use

Speaker 10: this collected data to suggest

Speaker 10: other shows you might like based on what you watch.

Speaker 10: However, the less bragged about use case

Speaker 10: is utilizing it to better target ads to you,

Speaker 10: which they do all the time.

Speaker 10: To be fair, these manufacturers now explain that

Speaker 10: some collection is occurring when

Speaker 10: you enable these options in your settings.

Speaker 10: They've also come forward to say

Speaker 10: that your data remains anonymous and that

Speaker 10: it is possible to turn off or opt out of these trackers.

Speaker 10: It just requires staying vigilant

Speaker 10: when setting up your TV and not

Speaker 10: just okaying through every step of process.

Speaker 10: But even with all that, is it really that anonymous?

Speaker 10: I mean, you're signing into Netflix and

Speaker 10: your IP address can vaguely

Speaker 10: give away where you are in the world.

Speaker 10: So it'd be pretty easy to narrow down who you

Speaker 10: are if that was something someone really wanted to do.

Speaker 10: Every day, companies take strides to become more privacy

Speaker 10: sensitive and forward facing when it

Speaker 10: comes to the data they're collecting on you.

Speaker 10: But the only way to take real steps

Speaker 10: to maintain your privacy is to

Speaker 10: not connect to the Internet and use

Speaker 10: your smart TV as a dumb TV.

Speaker 10: But as mentioned earlier,

Speaker 10: this is just one way smart TVs can be sold cheaply.

Speaker 10: In an interview with The Verge,

Speaker 10: Vizio's CTO claims that data collection

Speaker 10: for ad purposes isn't the crux of their business model.

Speaker 10: They could sell TVs that don't have

Speaker 10: any trackers and it wouldn't cripple their business.

Speaker 10: They've diversified their revenue streams.

Speaker 10: But if they were to do that,

Speaker 10: they would have to sell their TVs at

Speaker 10: a higher cost to offset

Speaker 10: the losses from not collecting data.

Speaker 10: Besides trackers, TV manufacturers can continue to earn

Speaker 10: dollars after the TV is sold by running their own ads.

Speaker 10: That could be on the splash page when you turn on

Speaker 10: the TV before switching to

Speaker 10: your streaming service or cable,

Speaker 10: or it could be during one of

Speaker 10: the many free movies or shows they offer.

Speaker 10: Partnering with media companies

Speaker 10: also seems to be a fruitful route.

Speaker 10: Many smart TVs come preloaded with a set of channels that

Speaker 10: can be watched for free once

Speaker 10: the devices connect to the Internet.

Speaker 10: These channels contain high value ads because of

Speaker 10: their ease of use coming straight out of the box.

Speaker 10: With these ads, the company that runs the channel make

Speaker 10: some money and the TV manufacturer also make some money.

Speaker 10: In the last few years,

Speaker 10: TVs have gotten a lot smarter and a lot cheaper.

Speaker 10: But all tech companies need to turn a profit.

Speaker 10: Cheap tech or even free tech

Speaker 10: is never truly free or cheap,

Speaker 10: it's just that the transaction that's taking place

Speaker 10: isn't always a monetary one for you.

Speaker 10: Data is the new currency.

Speaker 10: With that, the responsibilities that

Speaker 10: we take on as consumers have become greater.

Speaker 10: And like our TVs,

Speaker 10: we have to become smarter because of it.

Speaker 10: [MUSIC]