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The Future of TV Brand Licensing

By: Mark Seavy

Walmart’s potential acquisition of Vizio could eliminate yet another television brand from broad distribution. The anticipated purchase comes at a time when there are few TV brands on retail shelves in the U.S. market.

It  remains to be seen whether licensed brands like RCA, Thomson, Philips, and Toshiba can help fill the void. But with only three major brands—Samsung, Sony, and LG Electronics—remaining in broad distribution, it appears commodity pricing has outdistanced brand equity for consumers in the television space.

And while Hisense, TCL, and the newly revived Sharp could provide some competition, the television landscape has become a race for the lowest price due in large part to competition from smart phones, tablets, and notebook PCs as more consumers use these devices for viewing content. As a result, television unit sales declined 12% in the U.S. in 2023.

Vizio got its start selling excess Gateway TV inventory through Costco after the one-time PC brand abandoned the business. Vizio was also once a low-price leader for retailers. But now, the company’s value lies more in its SmartCast operating system (OS) and advertising platform than the TV brand itself—something that is attractive to Walmart as it builds out an advertising business.

The same holds true for OS and platform provider Roku. It has about 80 million user accounts in the U.S., Brazil, Canada, and Mexico after having added 10 million in 2023, including four million in Q4 alone. Roku licenses its OS software to TV suppliers, a strategy Vizio is embarking on this year.

Where this leaves the licensed brands—many of which were once market share leaders for TVs—isn’t completely clear. In particular, the RCA brand once had the top U.S. television market share. But that was before Established Inc. purchased it along with several other brands, including Thomson, Ferguson, and others. By that time, RCA’s value had diminished compared to the days when it was owned by Thomson Consumer Electronics, especially with younger consumers.

“Consumers have always been focused on brands they know but also on the functionality/ price point value ratio – that means that there has been room beneath the Samsung/ LG higher-end positioning for a mid-market offering of a multitude of brands” said LMCA CEO Ciaran Coyle, whose firm represents the Kodak, Compaq, Emerson, Philco, and other brands. “They can sit alongside house brands since retailers need to offer a range of brands across different functionality/ price points – not just the house brand. The Walmart acquisition of Vizio will simply mean that the retailer has a global brand as a house brand. It doesn’t mean the demise of other TV brands since Walmart will still need to offer a full range.”

Another hurdle for companies that may deploy licensed brands is profitability. Both Vizio (down 10% in Q3) and Roku (down 13% in Q4) have reported negative gross margin on sales of devices, which largely consists of TVs.

“Investors are concerned about the ongoing decline in those device margins,” said Nick Zangler, a Research Analyst at the firm Stephens. “It is a question of at what level will these device margins level out and when that might occur?”

Those negative gross margins are largely offset by increased design wins and installation of the companies’ software, and revenue sharing on ads. For example, Vizio added 1.3 million subscriber accounts in Q3 and ended the quarter with 17.9 million, CEO William Wang said. The company’s WatchFree+ platform carries 290 advertising-free streaming channels and has more than 15,000 on-demand titles.

“It’s no surprise that the TV environment has been hyper-competitive over the past few quarters,” said Wang, whose company recently launched low-priced 65-inch ($499) and 75-inch ($699) LCD televisions. “We’ll continue to focus on what we can control, which includes offering high-quality TVs at a price that delivers exceptional value to consumers.”

According to CEO Anthony Wood, Roku has a strong relationship with Walmart and is less concerned about Vizio’s potential sale to the retailer than it is with preserving profit.

“We wanted to make sure that we are competitive but being thoughtful about how the economics of the overall business work,” Wood said. “That may mean forgoing some volumes in the immediate term because we don’t want to chase some of extraordinary pricing that we have seen.”

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