Electronics maker Vizio is embracing its Platform Plus streaming platform as a long-term driver of revenue as sales of its television and audio hardware starts to cool.
On Wednesday, the California-based company said it generated $408.9 million in net revenue across its business in Q2, an increase of 2 percent compared to last year.
Sales of its smart television sets and soundbars generated about three-quarters of Vizio’s revenue last quarter, though the company said it increased sales of its hardware by only 5% compared to last year.
The slowdown is part of a broader trend across the consumer electronics market. Like other companies, Vizio saw a significant increase in hardware sales at the start of the global coronavirus pandemic two years ago as local governments began issuing stay-at-home orders, which drew more interest in television consumption.
But as the pandemic began to cool, so, too, did hardware sales: Vizio said it shipped around 1.1 million smart TVs and sound bars last quarter, the same number it reported three months ago.
Still, Vizio got enough of its SmartCast-powered TV sets in front of new customers to help grow the number of households using its streaming platform. On Wednesday, executives said 16.1 million Vizio TV users are actively engaged with its SmartCast platform, up from 15.6 million the previous quarter and an increase of 15 percent compared to last year.
Like other companies, Vizio sells advertisement space on the home screen of its SmartCast service and operates its own free, ad-supported streaming television service called Watch Free Plus. Both afford Vizio opportunities to generate revenue from its customers once their smart TV sets are in a home. Vizio said its Platform Plus business, which includes SmartCast and Watch Free Plus, earned $110.8 million in revenue in the three months ending June 30, an increase of 69 percentcompared to last year.
On a conference call with investors, Vizio’s Chief Financial Officer Adam Townsend said the company might be willing to reduce its profit on some of its budget television sets if it meant growing SmartCast’s customer base.
“Strategically, we’re willing to be at a low gross-profit margin on our TV unit ad sales, because they’re so valuable once we get those units in homes and generate recurring revenue streams that come from our ARPU (average revenue per user) model,” Townsend said. “To have a low margin at the onset of selling a unit, then to drive a high margin from our platform business, that strategy works incredibly well, and we’re now scaled up at a level where we want to lean into that approach.”
Once customers get those TV sets into their homes, they’re spending a lot of time watching them: Vizio said the total number of hours consumed on its sets grew to 8.154 billion, with around 50% of those hours coming directly from content streamed via apps on its SmartCast platform.
That helped increase Vizio’s Platform Plus profit 47%, with the company raking in $69.9 million in profit, primarily from advertisement sales. That number could go even higher after Vizio announced a new tool called Vizio Account that will allow customers to sign up for and manage subscriptions to third-party streaming services like Starz and Discovery Plus from within Vizio’s streaming ecosystem.
It wasn’t clear from Vizio’s announcement if the company would take a cut from each subscription sold through Vizio Account, similar to what Roku and Amazon do with competing sales products. But on Wednesday, Vizio’s Chief Executive Officer William Wang strongly suggested that was the case during a conference call with investors.
“Vizio Account is the foundational layer needed to bring interactions and commerce to our smart TVs down the road,” Wang said, adding that the feature is backwards compatible with existing SmartCast-powered TV sets that have been in customer homes for years and should roll out to “the vast majority” of Vizio TV sets by the end of the month.
“We’re still in the very early innings of what a smart TV can become,” Wang said.
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A version of this story first appeared at Fierce Video.
