Cable giant Comcast has been weighing the acquisition of a TV-maker to bolster its nascent smart TV platform efforts, Protocol has learned from industry insiders. One of the companies approached by Comcast has been California-based Vizio, according to three sources with knowledge of these conversations.
Separately, Comcast has also eyed TV-maker TP Vision, according to one source with knowledge of those talks. TP Vision is best known as the owner of the Philips brand in Europe, and it already has an existing business relationship with Comcast to manufacture the company’s Sky Glass-branded TV for the U.K. market.
Talks between Comcast and Vizio are said to have occurred both in 2021 and early 2022. It’s unclear how far the discussions with each company progressed, or whether they are still ongoing.
Spokespeople for Comcast and Vizio declined to comment. TP Vision did not immediately respond to a request for comment.
It’s all about XClass … and ads
Comcast began its foray into the smart TV platform world last year with the introduction of the XClass TV brand. The company announced a partnership with TV-maker Hisense in September and has since been selling two XClass-branded smart TVs at Walmart. Separately, Comcast also introduced its own smart TVs via its Sky subsidiary in the U.K.
By buying its own TV manufacturer, the company would be able to put more resources behind the development, marketing and sale of its own TV sets. This, in turn, would help Comcast remain relevant in a world where an increasing number of consumers cut the cord, and stream their favorite programming via their smart TVs.
Not only have smart TVs helped to disintermediate streaming, they have also become an important source of revenue for companies like Amazon, Roku and Samsung. That’s due in large part to the growing popularity of ad-supported video, including linear ad-supported streaming channels. Just last week, Comcast put out a report highlighting that six out of 10 households with smart TVs watch these basic cable-like channels.
Vizio is cheap. Maybe too cheap.
Vizio would make an interesting acquisition target for Comcast: The Irvine-based company has been one of the biggest TV brands in the U.S. for a number of years, thanks largely to budget-priced devices. Vizio has also been building out its own advertising business, which includes both ad targeting technology as well as its own free streaming service. In 2021, the company generated $309 million from advertising and other non-hardware revenue sources.
However, Vizio doesn’t have its own manufacturing capabilities and instead depends on contract manufacturers. The company has also struggled to compete with Chinese competitors like TCL, which has its own manufacturing capabilities, giving it more leverage on pricing. During the first quarter of this year, Vizio’s hardware gross margin fell to just 2.1%.
Vizio has in the past looked for an acquirer, and it entered a $2 billion deal with China’s LeEco in 2016. That deal fell apart when LeEco wasn’t able to secure necessary financing. Vizio held talks with multiple possible acquirers following LeEco’s decision to call off the acquisition, but ultimately decided to pursue a public offering last year.
The company’s stock has since struggled, and fell below $9 per share on Tuesday — far below the IPO price of $21 per share. The company’s current market cap is around $1.7 billion, which is less than its 2021 revenue. However, Vizio is a controlled company, and its CEO William Wang owns the vast majority of voting shares, giving him the ultimate say over any possible deal. A source close to the company expressed doubt that Wang would sell for anything close to the current valuation.
Any possible acquisition of a TV manufacturer could also be impacted by Comcast’s decision to enter a streaming joint venture with Charter. Announced in April, the deal is meant to further fuel the cable companies’ streaming platform ambitions. Comcast is looking to contribute its XClass TV efforts as well as its ad-supported streaming platform Xumo to the joint venture, while Charter is adding at least $900 million in capital. The deal is subject to regulatory approval, and it’s possible that Comcast would wait for it to close before making any major acquisitions in the space.