Should Amazon Buy a TV Manufacturer?
Eh, probably not.
This question arose in response to news reports that Walmart is negotiating to buy television manufacturer Vizio. Vizio is the largest TV brand sold by Walmart and Walmart is Vizio’s largest customer. So, it might make some sense that Walmart would have an interest in owning this significant vendor.
Of course, Walmart doesn’t generally feel the need to own its suppliers. More commonly, Amazon does, acquiring among others, Ring (doorbells and security systems), Blink (security cameras), and Eero (home networking). It only recently abandoned a plan to acquire Roomba (robot vacuum cleaners). In addition, Amazon has a robust proprietary hardware business with Fire TV streaming devices, Fire tablets, Kindle e-Readers, and Echo smart speakers.
Does this Walmart news suggest Amazon might also need to own a leading TV manufacturer to not miss out on some opportunity? We need to understand why Walmart might want to be in the TV manufacturing business to answer the question.
That answer seems to be advertising revenue. Historically Walmart and other retailers have charged manufacturers for in-store advertising and promotion. Similarly, Amazon sells a lot of “sponsored” placements on their selling pages. Indeed, advertising is one of the fastest growing revenue categories for Amazon, and that is in part because Amazon has grown the business beyond retail-connected ads.
Walmart may feel the need to own an advertising platform. In the new world of streaming television, the hardware manufacturer effectively owns ad inventory. That Netflix shortcut button on your cable or streaming box remote is an ad! The homepage and search function are major ad sales opportunities. And Walmart has not had a way to participate.
In contrast, Amazon has multiple platforms for delivering advertising. We look at Amazon shoppers, which like Walmart and Walmart.com, includes the vast majority of US shoppers. 53% of US Amazon customers own at least an Echo device, a Fire TV device, a Fire Tablet, or a Kindle e-Reader. Echo devices are the most prevalent, with over one-quarter of customers owing one (Chart 1).