Visualizing Vizio’s Path to Growth After IPO
Vizio is more than just a TV manufacturer.
At least that’s how the company would like you to think of it ahead of its IPO slated for this week.
The company, founded in 2002 with TV and sound bar sales in mind, has been steadily generating more revenue from areas including ad sales and SVOD subscriptions that its smart TV OS, known as SmartCast, helps drive.
These non-hardware revenue streams are captured in Vizio’s Platform+ segment, which only accounted for 7% of Vizio’s total revenue in 2020 but was up 133% year-over-year. Those figures were respectively 93% and 7% for Vizio’s device segment.
It’s no wonder that on the second page of Vizio’s amended S-1 filed last Tuesday, Vizio said Platform+ revenue “will be the key driver” of its future margin growth and financial performance.
However, in order to continue to accelerate growth of Vizio’s Platform+ unit in the years ahead, it may become necessary for Vizio to take a page from fellow connected-TV market player Roku, which has similarly become a company less reliant on hardware sales in recent years.
Roku credits some of the growth of the Roku Channel in 2020 to greater programming options, which is something Vizio focused on last year as well. However, it’s become increasingly clear that Roku is interested in exclusive programming, and that’s a growth strategy Vizio may have to mimic to some degree in order to keep SmartCast competitive.
Creating original shows is not something mentioned in the “Our Growth Strategy” portion of Vizio’s S-1, and the company hasn’t appeared to make deals on that front recently like Roku has.
But offering shows that cannot be found elsewhere almost seems to be becoming table stakes among SVOD-aggregating interfaces like SmartCast. Aside from Roku’s efforts on this front, just look at Prime Video and Apple TV+, for example.
For a company like Vizio, getting a more attractive library of programming is something more likely to help it reach consumers.
It’s unlikely that a consumer would go and purchase a new Vizio TV (the cheapest on Vizio’s site currently being listed at $120) just because the company scooped up the rights to a few shows, or made a few shows, that they like, for example.
But it’s possible there are some consumers currently who have Vizio TVs and Roku sticks yet choose to stream SVOD content via the latter, despite having access to most of the same major SVODs on both (glaringly, HBO Max is not yet on SmartCast).
And programming could be the hook to incentivize these consumers to start spending more time on SmartCast instead.
Meanwhile, to keep investors satisfied, Vizio will need to ensure its smart TV OS holds compatibility with major SVODs, given increasing amounts of time will be spent there in the coming years.
Vizio has distribution deals with most of the major SVOD players, and there aren’t really any big forthcoming SVOD launches it has to worry about now that Paramount+ is out the gate.
But lacking HBO Max is substantial during a year that it’s getting 17 Warner Bros. movies the day they hit theaters. Vizio is also not listed on Discovery+’s list of supported browsers/devices.
Addressing these issues would likely help boost time spent with Vizio’s smart TV OS, given app availability impacted 31% of replacement TV sales in 2020, up from 23% the year prior, per NPD Group.
Vizio’s SmartCast still has a way to go before it’s considered a leading smart TV OS, data from connected-TV analytics company TVision suggests. Year-to-date, SmartCast accounted for 4% of time spent with the connected-TV devices that TVision measured.
The fact that Vizio’s SmartCast is so focused on becoming the center of the smart home experience may be a less flashy initiative that helps it gain market share moving forward. SmartCast is compatible with Siri, Google Assistant and Alexa-enabled devices, and that could help it be utilized over other streaming OS systems that aren’t.
The best-case scenario for Vizio post-IPO is a 12-month run similar to what Roku just recorded, as Roku’s stock price rose more than 260% from March 2020 to March 2021.
That may not necessarily be in the cards, however, given Roku benefited from a quarantining-consumer base throughout last year. Meanwhile, 85% of the U.S. may be vaccinated by December of this year, the CDC projects. That will likely lead to some people streaming less content in the winter of 2021, compared with the same period in 2020.
