Welcome to Lowpass, a newsletter about the future of entertainment and the next big hardware platforms, including smart TVs, ambient computing and AR / VR. This week: Telly comes out of stealth, and Meta explains why and how it is funding third-party VR games.

This week’s Lowpass newsletter is free for all subscribers; next week’s lead story will only go out to paying members. Upgrade now to not miss it.

A closer look at Telly’s ad-supported TV

Told you so: Earlier this week, ad-supported TV startup Telly came out of stealth with an announcement that confirmed much of my recent scoop. In a nutshell, Telly is making a TV with a built-in second screen capable of displaying context-relevant content as well as ads. Telly is being led by Pluto co-founder Ilya Pozin, and the company plans to send an initial batch of 500,000 free TVs to consumers this summer.

I had a chance to chat with Pozin as well as Telly Chief Strategy Officer Dallas Lawrence and Chief Product Officer Sascha Prueter following the announcement to fill in some of the blanks around the technology behind Telly, its approach to privacy and why it decided not to build yet another streaming OS. Here’s what I learned:

Telly wants to make a smarter TV. Pozin told me that Telly doesn’t just want to make a free TV, but a TV that’s smarter than the devices you’ll find on store shelves today. “TVs, right now, aren't that smart,” he said. “They're the biggest screen in our home, but probably the dumbest. Our phones, our computers, our tablets do so much more.”

Pozin argued that a lack of innovation in the TV space had led to companies developing all kinds of other devices meant to address specific needs, including smart speakers and workout mirrors that are little more than screens with cameras. “Your TV should have been doing all of these things,” he said.

• Telly is using a customized version of Android AOSP, which powers both the “theater screen” (where you watch your movies and shows) and the “smart screen” (where Telly’s widgets and ads live).

• Apps can live both on the “theater” and the “smart” screen; a music app could for instance display cover art on the “theater” screen, but revert to a more minimal UI on the “smart” screen when the “theater” screen is turned off. Much of the navigation will happen on the “smart” screen.

• Out of the box, the TV will be preloaded with a number of apps, including Zoom for video chat, music services, a workout app and more. The company will also have a developer program and will give partners access to an SDK to build additional apps.

• Telly will ship with 40+ games at launch, including some motion games that make use of the built-in camera. Telly executives didn’t get into details about their partnerships for this, but some of the images on its website feature Active Arcade, a title made by the motion game startup Nex. (I talked to Nex CEO David Lee last year.)

• Telly’s device comes with a built-in voice assistant that can be used to pull up a feed from your security camera, or access controls for other smart home devices. The company is using a custom assistant based in part on third-party tech, not a white-labeled version of Alexa.

Telly won’t have streaming apps — with exceptions. Pozin said that the company didn’t want to waste developer resources on integrating streaming apps like Netflix and Disney+, which is why the device is shipping with a Google TV dongle.

• Telly is integrating closely with that dongle, allowing it to deep-link to content and apps; consumers will, for instance, be able to open specific streaming apps with the Telly voice assistant.

• Consumers who prefer to use a Roku or an Apple TV can do so as well. “We want to support every device,” Prueter said.

• Telly won’t rely on dongles for streaming video entirely: Out of the box, the TV will have a linear EPG that integrates both over-the-air television and free, ad-supported streaming channels.

• However, the startup doesn’t want to strike any direct licensing deals for this type of content. “We are not doing our own FAST service,” Pozin said. Instead, it will partner with an existing player in the space.

Why Telly wants to be Switzerland. Not having to license Netflix or Disney+ means that Telly won’t have to fight with streaming services when those licensing deals expire, but there’s another reason for relying on a third-party stick: It allows Telly to bypass restrictions on ACR.

• TV makers routinely use automatic content recognition (ACR) to monitor what consumers are watching, and then personalize ads based on that knowledge.

• However, Netflix in particular doesn’t like this at all. The streaming giant doesn’t allow TV makers to monitor viewing behavior or metrics for its service.

• “Roku can’t see what’s being watched on Netflix,” acknowledged Lawrence. “That’s the big challenge.”

• By letting Google’s dongle run the Netflix app, Telly can effectively keep its hands clean, while at the same time accompany Netflix viewing with relevant ads on the second screen.

• But ACR isn’t just about ads: Being able to monitor viewing across all apps also makes it possible to serve up relevant content, including actor bios and more – think Prime Video X-Ray, but for every streaming service. “We are designing an experience across wherever you get your content from,” Prueter said.

Telly’s biggest challenge: privacy. When Telly launched this week, it accidentally published an unedited version of its privacy policy that suggested the company was still trying to figure out whether there was “another way around” following data deletion requests. Pozin jokingly blamed this on my scoop, saying: “You shortened our QA process.” Regardless, it’s clear that a company that wants to give consumers free TVs in exchange for personalized ads will have to deal with a lot of privacy concerns.

• Lawrence said that Telly’s ad targeting isn’t all that different from what others in the smart TV space are doing, with the exception that other TV makers usually rely on third-party data brokers to compile household-level profiles.

• Telly on the other hand asks consumers upfront for a bunch of information — a process that’s more transparent and less error-prone, he argued.

• Some of the concerns brought up by Twitter users this week centered around Telly’s capabilities of detecting “the physical presence” of its users. Execs told me this wasn’t done via the device’s camera, which comes equipped with a physical shutter, and is only being used for video chat and related apps, not for ad targeting or personalization.

• Instead, Telly uses a separate sensor to detect motion and presence. “It’s basically the same technology that is used in some of the Nest products for proximity,” Prueter said. (Google uses both ultrasound and radar in various Nest devices for proximity sensing.)

• The sensor is being used to wake the TV from sleep mode, and can also detect how many people are in front of it at any given time. “It doesn’t record, it doesn’t transmit, it doesn’t (use) facial recognition,” Pozin said.

Pozin revealed in a note to press Thursday afternoon that Telly had gotten more than 100,000 sign-ups for its free TV within 36 hours; he had told me that the company had plans to ship “millions” of TVs next year.

Enjoy reading stories like this one? Then please consider upgrading to the $8 a month / $80 a year paid tier to support my reporting, and get access to the full Lowpass newsletter every week.

Meta has funded more than half of the titles on the Quest store

Meta officially announced the launch of a new third-party VR games publishing arm at GDC last month. In reality, Oculus Publishing has been working for years to support third-party developers with additional funding. To date, the company has funded more than 300 titles. Given that the total number of apps and games on the Quest store is somewhere north of 500, this means that Meta has given funding to more than half of those games.

Oculus Publishing is being led by Meta’s director of content ecosystem Chris Pruett, who used his GDC talk to share some additional details about the way Meta is supporting third-party publishers. The talk was recently shared on YouTube and is worth a watch, but here are some highlights:

• Consumers have spent more than $1.5 billion on Quest apps and games to date; more than 40 titles have brought in over $10 million in revenue.

• Third-party developers are currently working on another 150 titles that are being supported by Meta.

• Oculus Publishing has a hands-off funding model, according to Pruett. “Our funding model doesn’t look like a traditional publisher,” he said. “We’re not interested in owning your IP, we’re not interested in controlling the product you make.”

• At the same time, Oculus Publishing isn’t about taking wild and unproven bets. “We don’t fund things that sound good on paper but have no proof behind them,” Pruett said.

• Oftentimes, Oculus Publishing adds money to development that’s already in progress.

• “We mostly don’t fund 100% of the development cost,” Pruett said, adding by the way of an example: “Maybe we’ll fund a third of your development budget.” The rest of the money could be self-funded, or come from other platforms.

• In exchange for funding, Oculus Publishing does want one thing: better quality. “What we want is a larger game,” Pruett said. “We want higher visual polish (...) we want (a) better frame rate, we want better art, we want more content.”

Improving these aspects of games is key to growing the Quest ecosystem, Pruett argued. “The thing that drives engagement, revenue, adoption on our platform is quality,” he said.

What else

EU regulators have approved Microsoft’s Activision acquisition. The $68.7 billion deal is still in limbo due to objections from UK regulators.

Amazon launches new Echo speakers, smart displays. The new line-up includes the Echo Pop, which is … an Echo made for teens, I guess?

Google is extending free live channels to Android TV. After rolling out free, ad-supported TV to its Google TV platform a month ago, Google is now extending the channels to Android TV devices.

Comcast CEO expects to sell Hulu stake to Disney. Brian Roberts told investors this week that his company will likely sell its 33% to Disney in early 2024.

Amazon increases prices of its streaming sticks for first time ever. The price increase is limited to Europe for now, but it’s nonetheless noteworthy; most companies have thus far opted to subsidize cheap hardware in the face of increasing component costs.

Swerve Sports expands to Amazon’s video platforms. The free sports documentary channel is now reaching over 5 million viewers across 22 FAST services.

AR collaboration platform Campfire announces launch. The enterprise AR company, which acquired the assets of the now-defunct Meta AR startup, has launched a $15,000 starter pack.

Apple’s new headset meets reality. Apple execs really wanted sleek AR glasses. Instead, they got a headset with a battery pack. Great coverage from Bloomberg’s Mark Gurman.

That’s it

It’s that time of the year again … BBQ season is here! I’ve made some chicken and some pork chops so far, as well as soy-glazed asparagus. Yum! Still, I could use some inspiration for new things to try. What kind of unusual things are you cooking outdoors this summer? Let me know in the comments, or reply directly to this email.

Thanks for reading, have a great weekend!

The web version of this newsletter was updated on 5/18 with additional details on the consumer response to Telly’s launch.