LeEco’s $2B Vizio Deal Raises Questions About Its Division Of Television And Data Assets

LensChinese electronics brand LeEco’s $2 billion acquisition of American smart TV manufacturer Vizio on Tuesday divorced its TV software and hardware operations from its data business.

Although LeEco billed the deal as a move to drive more retail distribution opportunities for its electronics in the US, AdExchanger sources suggest the separation may be due to escalating Federal Trade Commission (FTC) interest in the company’s data practices.

“I would speculate that they isolate that part of the business until the dust settles because we have reason to believe the FTC had set an agenda item related to Vizio specifically,” said a source who asked to remain anonymous because of their knowledge of the companies. “This route made more sense to siphon off all liability associated with them as a separate company.”

That source was referencing LeEco’s move to spin out Vizio’s data business Inscape into a private, standalone entity.

The terms of the transaction are such that Vizio’s chairman William Wang retains 51% stake in Inscape to LeEco’s 49%. LeEco will continue to license Inscape’s data for use within its smart TVs for the next ten years. Vizio is merely one example of the race for set-top box data to gauge television viewership with greater precision than Nielsen’s panel alone.

Vizio has not escaped FTC scrutiny in the past; the company’s name came up in an FTC cross-device tracking workshop last November, when Justin Brookman, policy director for the Office of Technology Research and Investigation made Vizio the example of how companies rework their privacy policies “to monitor and share information about what you’re viewing with third parties.” 

And Vizio has faced countless class-action lawsuits, alleging violations of the federal Video Privacy Protection Act. Namely, that Vizio turned its Smart Interactivity feature on by default, collected and resold television viewership data to third party companies without an explicit opt in from the consumer up front.

(Competitors like Samsung and LG, by contrast, required a user to opt in before collecting that information).

“The main issue the marketplace has with Vizio’s business model is it treats data as a product, but it doesn’t really create any consumer awareness for its primary profit stream,” said Ashwin Navin, CEO of Samba TV. “Buyers look at that and think, ‘How well are you really aligned with the people who consume your product?’”

After Vizio tried and failed to IPO last summer, seeking an acquirer that would give it “supply-chain advantages” in the television ecosystem became a logical next step.

“Vizio got a good price for their TV business and it saved them from waiting for a lukewarm IPO market to open up,” said Dave Morgan, the CEO of Simulmedia. “They get a chance to create independent value in the data services business, which I believe has the potential to be a very big business.”

It’s not an easy environment for a television manufacturer.

“If there isn’t a sophisticated internal strategy, one that builds a continuous, always-on relationship with the consumer that traverses all their devices like Apple or a platform like Google, I think you’re in deep trouble,” Navin said.

In addition to “intelligent hardware,” LeEco claims it offers a litany of connected products enabling the delivery of content and powering applications cross-screen, giving Vizio more runway and development resources.

LeEco, Vizio and the FTC did not respond to requests for comment.

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