Tuner-Free ‘TVs’: Why Now?

Earlier this year, Vizio, a market share leader in U.S. TV sales, announced it is removing the ATSC tuners that facilitate free-to-air viewing from several of its TV product lines. This move, along with the slow-down of TV sales in Mexico where analog TV transmissions have been primarily shut off, results in a forecasted 10% drop in shipments of ATSC tuner-equipped TVs in 2016, according to DTC’s latest forecast.

It’s somewhat curious timing as many in the video business are predicting greater over-the-air (OTA) use with the advent of cord cutters and/or “cord nevers” who aren’t traditional pay TV subscribers. Although still only a sliver of the overall TV consuming market, OTA comprised about 1 million U.S. households in 2015 (as opposed to paying for a traditional pay TV package), according to Nielsen. Perhaps Vizio isn’t buying the idea that tuners are important to those buying TVs because they may want to join the ranks of “cord cutters and nevers” someday. If they do, they’ll have to buy an external tuner and antenna to receive broadcasts from major networks such as ABC, CBS, Fox and NBC.

Apparently Vizio didn’t want to run the risk of getting crossways with the FCC as it is calling the new sets “home theater displays” instead of TVs. This is likely because of the FCC rules handed down during the analog-to-digital TV transition, requiring all new TV receivers shipped into and within the U.S. to have ATSC tuners as of May 1, 2007.

If Vizio isn’t concerned about missing sales to potential cord cutters, then why build a device that is used like a TV, but isn’t labeled a TV?

It’s likely that Vizio wants to make its TVs as cheaply as possible, and the absence of an on-board tuner shaves some cost. Competition from an influx of Chinese brands into the U.S. market is creating even more competition in an industry already known as fiercely competitive and with slim margins.

Could product differentiation also be a reason? According to Vizio’s own surveys, it found that less than 10% of its customers were watching OTA broadcasts. It could be that Vizio would like to use savings from removing ATSC tuners to include other features that focus on 90% of its customers who may only use the set as the second screen for streaming videos in a pay TV household.

No matter the reason for Vizio’s choice, no other suppliers have followed Vizio’s lead to date. For now, it seems as if other suppliers believe offering the OTA option and the label “TV” for their products is still important. Will that change for the next product cycle? Stay tuned.