TV manufacturers are not about to cede the future of the connected living room to Amazon after the e-commerce giant announced the release of its own TV set last week. In a direct response to the move, LG’s ads division announced its own TV software called River OS, which will compete with Fire TV sets, and it will work with other TV manufacturers as the industry realigns around streaming TV services.
“I think it’s important for the industry to know that there are multiple options coming,” says Raghu Kodige, CEO of LG Ads. “This is something we have heard from our [original equipment manufacturer] partners who are looking for other companies to work with. They are a little bit worried about giving too much power to Google or Amazon.”
The connected TV space is comprised of TV manufacturers like LG, Samsung and Vizio; TV device makers like Roku, Apple, Amazon and Google; and streaming services like Netflix, Disney+, Paramount+, and NBCUniversal's Peacock. In the battle for control of the living room -- and connected TV advertising -- these stakeholders clash in multiple areas. Amazon, for instance, owns Fire TV sticks, video apps, and now its first TV hardware; not to mention Amazon controls the e-commerce store that sells TVs.
LG Ads’ new operating system is one example of how competitors will try to keep up. Samsung and Vizio both have operating systems that integrate TV apps and devices through their sets, and the software is key to their growing advertising businesses. The TV manufacturers may not approach Amazon’s level of advertising, which stood at about $8 billion in the second quarter, but for Samsung, Vizio and LG, advertising is an important piece of how they will make money in the future.
This year, LG Ads’ River OS is launching in India before it comes to the U.S. in 2022, Kodige says. LG will embed its software in TVs from more than 10 manufacturers, including its namesake LG, Sharp, Toshiba and more. The idea is to offer an alternative platform to Amazon. It should be noted that when Amazon holds special sales like Prime Day, Amazon-branded tech is always among the top sellers.
Amazon also works with manufacturing partners like Toshiba and Pioneer, and those partnerships are complicated by the fact that Amazon is now in the TV-making business. “If you think about other product lines, its own brands also compete with the other brand manufacturers’ products,” Kodige says.
Brian Wieser, global president of business intelligence at GroupM, says that Amazon’s push into TV manufacturing could encourage rival set-makers to embrace new software partners, like Roku or LG Ads. Roku has been a surprisingly resilient as an independent player in the TV space, building its business around devices that connect to the TV and ad sales.
Amazon can always pay more TV makers to adopts its software, Wieser says, but “if you’re an [electronics manufacturer] do you really want to do that, given Amazon’s history of white labeling its own products?”
Amazon has an ecosystem that includes the Alexa voice-controlled assistant, Prime Video and IMDb TV apps, Fire TV software, music and podcast services, and content deals like one with the NFL to exclusively host Thursday Night Football starting next year. Amazon also is the front runner to win a deal for NFL’s Sunday Ticket, which is worth billions of dollars and comes with rights to out-of-market games, according to CNBC.
The advertising pie is of primary concern for the TV manufacturers. Roku and Amazon both claim 50 million-plus households in their ecosystems. Samsung has said it has the ability to serve ads to 45 million households. Vizio reports that it is capable of reaching 11 million TVs with “dynamic ad insertion,” the ability to swap out creative.
The software that runs all these TVs is crucial to own because that’s where the data resides. U.S. CTV ad spending is expected to grow 41% year over year to $11.4 billion in 2021, according to eMarketer. In comparison the total TV ad marketplace is expected to hit $67.5 billion in the U.S. in 2021, according to the research firm.
Tal Chalozin, chief technology officer at Innovid, a video advertising platform, says that Amazon’s TV set will only accelerate the advertising rush into CTV. “CTV is the biggest thing going for brands like P&G, Ford, GM and Unilever,” Chalozin says. “Amazon is going to help move dollars from linear TV into CTV, so this just serves to increase the tide.”
It's hard not to see Amazon’s own ad business goals in the launch of its new TV, too: “Advertising is a much better business than selling TV sets,” Chalozin says.