Google and Amazon could control 80% of smart TVs in a decade

What does this have to do with the price of connected televisions (CTV) in England? I’m glad you asked.

In 2021, users will spend $ 133 billion on mobile apps. Apple and Google – the largest and third largest companies in the history of the planet – take between 15% and 30% of every sale made. That’s $ 30 billion in tolls and taxes paid to the two members of the smartphone duopoly alone. (This is why Epic is currently suing Apple for uncompetitive practices.) We are now on the precipice of the same phenomenon that is happening with CTVs around the world. Before explaining why, take a look at this map:

There is a perception of Samsung as a Goliath in CTVs. Of course, the company is by far the market leader. But Samsung’s market share is around 15%. Conventional wisdom also dictates that Roku is a CTV giant as well. While this is certainly true in the United States, where Roku owns 34% of all CTVs, its presence outside of the United States is much smaller; Roku currently only owns about 6% of all CTVs in the world.

In fact, if you look at the map above, you’ll see that the biggest block of TVs sold each year (42% of all TVs shipped, or 105 million TVs) are not from the big brands you know and love. . Rather, they are made by regional or local brands, often protected by the trade laws of each country. These regional / local brands buy the guts of television in China and license their CTV operating systems to various players.

If you want to truly understand the CTV ecosystem, you have to look beyond the American shores and into the world at large. To do this, here is another card:

In most markets, almost everywhere on Earth, the # 1 and # 2 TV brands are Samsung and LG. But often brands ranked 3 through 5 are among the 600 regional CTV brands that make up that 42%, or 105 million CTV televisions per year. And that’s where the tech giants come in.

The manufacture and sale of televisions is a very low-margin business. Therefore, everyone from Roku to Samsung to Vizio is launching their own operating systems, programming channels, and ad platforms – the same reason Google went with the smartphone operating system. Increasingly, TVC is a commodity business – the lowest price wins. So if a regional brand can find a way to save money or make money elsewhere, they will jump on it.

Right now, Google is paying local brands and Chinese chipmakers up to $ 10 per set to install its Android TV operating system on their CTVs. It might not sound like a lot, but if your margin on a $ 300 CTV is only $ 30, then 10 New dollars is a 30% margin increase per set. Additionally, local TV makers find the Android mark on the box to help move the units. Remember, Android owns 70% of the phones around the world. It’s OS McDonald’s. In addition, Android is a very agile and powerful operating system. Having Netflix, Disney, and Amazon Prime on a CTV homepage are now table stakes. It is difficult to sell a television on which these applications are not preinstalled. But, outside of the United States, local streamers are just as “must have”. Android, after more than a decade in the global smartphone business, has the technology and the bandwidth to include far more local programming apps than any other operating system outside of LG and Samsung.

There aren’t many companies in the television industry that can afford this kind of bribe “investment.” It’s one of the weapons that Google parent Alphabet brings to the battle for screen precedence, if you will. But that’s not really its most powerful lever. Google controls 94% of all searches in the solar system. I’m not saying Google would search for a “game” to give TVs with their Android operating system an edge. Corn I am saying that Alphabet is currently being sued by 15 U.S. states for allegedly collaborating with the tech oligarch formerly known as Facebook to rig programmatic advertising in their collective favor. (Google “Jedi Blue” and happy reading.)

Elsewhere in the tech oligopoly, Amazon, whose Fire TV dongle is the fastest growing CTV platform in the United States, has just released the Fire CTV consoles. Oh, and in case you missed it, Amazon also has the world’s largest e-commerce retail platform. But there’s no way he’s using that leverage of power to position himself against his direct competitors in the CTV space… is there? In October 2020, Democrats on the House Judiciary Subcommittee on Antitrust released a 450-page report that found the company was using sales and product data to identify and replicate profitable products presented by third-party sellers on its platform – sometimes contacting the manufacturer directly “to get rid of the seller’s efforts and then take that seller out of the equation.”

That said, Alphabet / Google / Android and Amazon / Fire TV / dongle still only control a total of 12% of the global CTV operating system market. However, as the BBC has said, this is changing very quickly. I recently had the chance to interview CTV manufacturers in many markets in Europe, South America, Asia and the Middle East. These are members of the 600 local and regional CTV brands that buy chips and operating licenses from other players – most often preinstalled on chips they buy in China – aka System on a Chip (SoC). The interviews aimed to get a feel for the direction of CTV’s global market.

In each case, unsolicited, these different TV brands, from different continents, told the exact same story. “Android has grown from 10% to 70% of operating systems sold over the past two years,” said a regional OEM in South America, while a regional OEM in the Middle East reported that Android had gone “from zero to 80% of units sold in one year.” A regional European OEM said growth was from “less than 10% to over 50% of units sold in less than a year.”

The OEMs asked not to be named. The reason? Refer to this “94% of all searches” thing.

In America, Google’s Chromecast has lost shares to Fire, TCL, and Hisense in recent years. But with Roku dominating the United States and regulators at the end of its rope, Alphabet has clearly made the strategic decision to focus on the rest of the world (for now), that 42% and the 600 local brands. Why? Regulators in many other countries have yet to sharpen their pencils and point them to Android. So Google sees an opportunity to make huge inroads in many regions – especially South America, Eastern Europe, and Asia – where Android now controls 50% of all CTV operating systems.

However, in the UK it is a different story. The country’s Competition and Markets Authority is already investigating the smartphone duopoly of Apple and Google for anti-competitive practices. Thus, the BBC’s request is not a new investigation, but rather the extension of an investigation already launched. The fear in England is that if they are allowed to cede their existing power unhindered, Alphabet and Amazon will take back 60-80% of new CTVs shipped over the next 10 years. The operating systems of these CTVs will be the custodians of hundreds of billions, if not trillions of dollars in advertising, subscription and e-commerce revenue. The BBC is concerned that Google and Amazon will then repeat the uncompetitive practices they have used in other markets to disadvantage programmers who do not have this leverage.

So I think the BBC is wrong. If smartphones and to look for and digital advertising and e-commerce are indications, in a decade, if nothing changes, the terrible new TV duo could control at least 80% of the TVC. The Beeb has just fired a shot that should to be heard around the world. As of this writing, it remains to be seen if other editors and programmers will join the fight.