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[Alex Webb] If Google and LG like smart TVs, so should the privacy police

The world’s tech police have the opportunity to succeed in televisions where they initially failed with the rest of the connected world, and ensure that users retain a firm grasp on their data.

Smart televisions are nothing new. Nor is the shift in the platform wars, where tech firms duke it out for primacy of their operating systems, from smartphones to the television set. But the fact that Inc. is developing its own smart TV indicates that there’s enough value in the user data to offset the hardware’s otherwise feeble profitability -- and that regulators should be quick to respond.

As ever, Germany’s Federal Cartel Office leads the way. It started an inquiry into smart TVs in 2017, and the first findings will likely be presented this year. But while Europe’s General Data Protection Regulation might assuage some concerns, very few other nations are on top of the issue. Consumers are mindlessly sacrificing reams of personal information and regulators are doing little to prevent it.

The timing has become urgent. The electronics industry’s annual bacchanal in Las Vegas has heralded many a false dawn when it comes to new technology (the Nokia N-Gage, anyone?), but last week’s edition set the scene for an industry shift to intensify.

New alliances were forged in smart TVs: Apple Inc. said the iTunes Store would be available on television sets made by Samsung Electronics Co., while its smartphone nemesis, LG Electronics Co. said its new devices would support both Alphabet Inc.’s Google Assistant and Inc.’s Alexa.

For regulators, the concerns focus on what are known as addressable ads. That’s where the same TV show carries different promotions for different audiences or demographics, above and beyond the segmentation of viewers that regional TV stations have long practiced. In 2016, addressable commercials accounted for just 5 percent of all ads, according to the World Advertising Research Center. By 2022, that will jump to 32 percent.

Television-makers sense an opportunity to boost their otherwise pitiful margins, and keep making money long after they’ve sold the initial device from selling content, apps and, most pertinently, ad space on welcome screens and channel guides. And those targeted ads inevitably rely on user data.

The appeal lies in tying the huge viewership that television continues to enjoy with the granular targeting of programmatic advertising, according to Mike Caprio, chief growth officer at adtech firm Sizmek. “If you can do both, then you’ll win.” It’s the holy grail that helps explain why Facebook and others are accelerating into video content. Smart TVs are vying for leadership.

Take a new television set. Many include automatic content recognition technology, which can monitor the shows you watch in order to ascertain viewing habits. Each HDMI port has a unique identifier, and users might unwittingly consent for the manufacturer to log what devices are plugged in -- the presence of a Sony PlayStation, satellite box and Apple TV could demonstrate a sizable household income. That data could be linked to your mobile browsing habits if you pair your smartphone to your set via Bluetooth.

If users aren’t fully aware of these risks, then regulators need to make it harder for firms to harvest all that data. As things stand, there’s very little stopping them.

Traditional TV manufacturers, cognizant of how handset-makers’ adoption of Android helped Google become a dominant player in ads, have so far largely stuck with their own operating systems. That’s likely why Amazon is building its own set, to bypass those hardware gatekeepers. But that also means they should attract the same scrutiny over privacy to which Silicon Valley has become accustomed.

As smart TV adoption reaches an inflection point, regulators need to get their act together quickly, and follow the German lead by finding an appropriate set of rules to stem the unwitting torrent of user data.

Alex Webb
Alex Webb is a Bloomberg Opinion columnist covering Europe’s technology, media and communications industries. -- Ed.