Roku’s decision to compete with its OEM partners will backfire, and TiVo will be unable to compete with Google et. al in smart TV operating systems
In an act of financial desperation, Roku introduced its first branded televisions at 2023’s Consumer Electronic Show (CES). As with Comcast and others that sat on fence for years, Roku’s entry into this space is far too late to make any real difference to consumers or to company financials.
The smart TV marketplace is largely dominated by CE OEMs with their own operating systems, including Samsung (39% penetration among US broadband households), LG (20%), and Vizio (17%). When Roku or any other smart TV OS vendor makes a move that is truly innovative (a rarity in this highly-commoditized space), these companies are quick to follow, if not lead. This is the marketplace into which Roku, Comcast, and others are entering; a world in which adding ever more free ad-supported channels is the best an OEM can do to differentiate, albeit temporarily.
While Roku’s strength in streaming devices (a vertical in decline) means its chances are better than Comcast, that’s not saying much: Comcast’s XClass TVs fail to register at all in Aluma’s consumer research and are increasingly difficult to find in partner retail outlets. Its joint venture with Charter to produce Xumo OS-enabled smart TVs will suffer the same fate.
What success Roku has enjoyed in the smart TV marketplace is due to sales of sets from its “valued TV partners,” which include a number of lesser brands. Its most widely-diffused partner is TCL, whose sets are in less than 8% of broadband households, only some of which are Roku-enabled. (TCL’s other smart TVs have Google/Android operating systems.) The second most diffused smart TV partner is Hisense, with sets in less than 6% of US broadband households. Notably, TCL also offers Google/Android TV operating systems, and Hisense has largely switched to Google and Vidaa smart TV operating systems, with few Roku offerings available.
With Roku now competing directly with their “valued” OEM partners, it won’t be long before TCL, Hisense, and others shift altogether to Google, Vidaa, or other platforms.
Speaking of other OS platforms, TiVo belatedly announced its entry into the smart TV space. Following the partnership model, sets with TiVo’s smart TV OS are poised to ship in spring 2023, with partners to include Vestel, Daewoo, Regal, Hitachi, Telefunken, and JVC, none of which meaningfully register in US broadband households. TiVo’s play is international, so perhaps its smart TV OS will far better in other countries. It can only hope. (For what it’s worth, TiVo should have made this play five years ago, if not earlier.)
Entering today’s smart TV marketplace, be it hardware or operating systems, shouldn’t be newsworthy, at least not in a positive sense. The realities of this space are brutal: fully commoditized, highly competitive, dominated by a few players, innovation free, with razor thin margins. Of course, that hasn’t stopped Roku or TiVo from turning up the CES media dial. Once the spin evaporates, however, these realities will set in.
Predictions:
- Comcast will drop the XClass brand in 2023, focusing instead on its new joint venture with Charter and the Xumo smart TV brand. It too will fail to gain footing and shutter in late 2024 or 2025.
- Smart TV OEMs will increasingly shift from Roku’s operating system and toward alternatives.
- In 2023, Roku will fail to meet the company’s expectations for smart TV sales in the US.
- TiVo will follow a similar path, unable to gain a sustainable OEM footprint in the US or beyond.