Company / division: Vizio
Vizio Files Suit Against LeEco Over Merger Termination Fee (Jul 12, 2017)
LeEco was to have acquired TV maker Vizio, but after months of delays the deal finally fell apart earlier this year, and now Vizio is suing LeEco over non-payment of part of the termination fee the companies agreed when they made the deal. The suit also alleges that LeEco never had the means to complete the deal, using it merely as a way to bolster its perceived financial stability at a time when there were lots of reports about its cash constraints. Given that those financial problems have only worsened since the deal closed, I’m not sure Vizio is getting the money it wants anytime soon, even if it wins the case. But LeEco is just getting clobbered at this point as a result of problems entirely of its own making, all of which stem from expanding overly aggressively from what had been a reasonably strong position in the Chinese market.
LeEco’s Acquisition of Vizio Officially Called Off – Variety (Apr 10, 2017)
There have been several signs that this acquisition wasn’t going smoothly, starting late last year when the companies said it wouldn’t close until 2017, pushing back the original close date, and continuing recently. The official reason for the collapse of the deal is regulatory headwinds, and supposedly tighter restrictions on getting Chinese capital out of the country, though of course LeEco has recently had a tough time getting money out of China to pay salaries in the US too, and that had nothing to do with regulatory barriers, so it’s possible that the real reason is some combination of factors. At any rate, what was to have been by far LeEco’s most prominent product and brand here in the US now won’t be, and it’ll have to fall back on its other, much less well known, products instead, giving it even more of an uphill climb in penetrating the US market.
It turns out Vizio has been collecting extremely granular data on users of its smart TVs, and then matching its IP data with offline data about individuals and households (essentially everything short of actual names). And it’s done all this without making users properly aware that this was what it was doing. The data related to everything consumers watched on the TVs, whether the content came through Vizio’s own smart TV apps or merely through one of its inputs from another box or antenna. Something I’d forgotten was that Vizio filed an S-1 in preparation to go public back in 2015 – it never actually went public because Chinese player LeEco decided to acquire them (a deal due to close shortly). Aside from talking about how many TVs the company sells, the S-1 makes a big deal of of the “up to 100 billion viewing data points daily” it collects from 8 million TVs, and touts its InScape data services, which package up this data for advertisers, although it says this data is “anonymized”, which feels like an alternative fact at this point. The risk factors in the filing even mention possible regulatory threats to such data gathering, so it’s probably fair to say that Vizio shared more information with its potential investors about the data it was collecting than it did with end users. To settle the case, Vizio has to pay a total of $3.7m in fines to the FTC and the state of New Jersey (whose AG brought the suit with the FTC), discontinue the practice, and disclose it to consumers. I can’t wait to see how it manages that last point – imagine turning on your Vizio TV one day and seeing a message pop up about the fact that it’s been tracking your every pixel for the last several years. Assuming that’s done right, it could be the most damaging part of it this for Vizio, which made over $3 billion in revenue in its most recently reported financial years. Meanwhile, yet another headache for LeEco to manage.