Vizio sees Q1 spike in streaming revenue as hardware sales wane

Smart TV hardware maker Vizio says revenue from its ad-supported streaming product Platform Plus grew to more than $102 million in the three months ending March 31.

The figure was disclosed as part of the company's quarterly earnings report, which was released Thursday afternoon, and represents a 97% increase compared to the previous year when Platform Plus revenue earned over $52 million.

Platform Plus includes Vizio's SmartCast operating system, which offers access to thousands of live- and video on-demand streaming apps like Netflix, YouTube, Pluto TV, Amazon Prime Video and Disney Plus, along with Vizio's own free, ad-supported streaming television service WatchFree+.

Vizio said the 15.6 million customers who have SmartCast-enabled television sets streamed a collective 4.116 million hours of content on its platform, an increase of 14% compared to the previous year, with its average revenue per user (ARPU) increasing by 64% to $23.68 per user.

According to data reviewed by Fierce Video, Vizio's Platform Plus represented around one-quarter of Vizio's overall revenue, which was reported at $485.5 million for the quarter, a 16% dip compared to last year.

"Our dual revenue model gives us the opportunity to invest in our award-winning consumer products, while also delivering continued advertising revenue growth," William Wang, Vizio's chief executive, said in a statement on Thursday, adding that he was "extremely proud of our exceptional first quarter results."

Vizio reported its quarterly earnings after the market closed on Thursday. Its stock price ended the day at $7.60 per share and jumped to over $8 per share in after-hours trading.

The streaming revenue is proving to be a big part of Vizio's overall revenue, especially as the sales of smart TV sets begins to slow. The company said it shipped 1.4 million smart TV sets in the previous quarter, a drop from 1.5 million compared to last year. Revenue from the sale of its hardware, which includes home audio equipment, dipped to $382.9 million, a decrease of 16% from last year.

Adam Townsend, Vizio's finance director, said the slowing demand for smart TVs was largely attributed to the end of stay-at-home orders and government stimulus programs offered during the coronavirus pandemic, but said Vizio's data showed shipments were actually up when compared to pre-pandemic data.

"If you look at the longer-term trajectory, we have seen a nice growth trend," Townsend said in a prepared statement read on a conference call with investors on Thursday. "We are increasingly confident in our ability to grow our TV unit shipment volume this year compared to last year."

Townsend said the increasing consumption of content on SmartCast and WatchFree+ could help the company increase its revenue from advertising and data licensing to between $107 million and $110 million by next quarter.

Analysts say Vizio's focus on its streaming platform products is part of a broader industry trend where manufacturers are placing less reliance on hardware sales for profit and are instead choosing to beef up their streaming offerings.

"Selling TVs has always been a low margin business, but selling the TV is not the main business anymore," Jason Cohen, a former portfolio manager who focused on entertainment companies and who now operates the streaming TV aggregator MyBundle.TV, said in an interview on Thursday. "The TV manufacturers are having a moment now where they are the gatekeepers of a growing streaming revenue opportunity...and they want to sell more devices in order to pull more people toward their apps and their ad-supported content, and it's the right strategy for them."

Cohen said the revenue growth offered by streaming platforms and services one of the reasons why companies like Amazon and Comcast are focused on selling smart TV sets with their respective operating systems built-in, and why companies like Samsung, LG, Roku and Vizio are investing more in content and advertising products.

"There's a lot of money, literally tens of billions of dollars, that still has to come out of the traditional pay-TV ecosystem and move into streaming, and that creates a lot of opportunity for a wider set of industry players, now including TV operating systems, to grow," Cohen said.