PlutoTV co-founder launches free TV hardware startup

New entrants are turning the channel on the TV market. The aim is to run a TV company more like a software firm than the traditional hardware structure it's operated on for decades.

Driving the news: PlutoTV co-founder Ilya Pozin is launching a TV hardware startup called Telly that will make TV sets and give them away for free.

Why it matters: Pozin is betting that advertising revenue and valuable consumer data can cover for the lack of TV sales.

Details: Telly recently closed a seed round that was led by consumer VC fund Protagonist and LightShed Ventures, the investment arm of media research and analyst firm LightShed Partners.

• Additional institutional investors include LionTree and Gary Vaynerchuck's VaynerFund.
• KKR's Richard Sarnoff, UTA CEO Jeremy Zimmer, MediaLink CEO Michael Kassan, TelevisaUnivision CEO Wade Davis, PayPal board member Jonathan Christodoro and SpotX co-founders Michael Shehan and Steve Swoboda also participated in the round.
• Pozin would not disclose the amount raised in the seed funding.
• VaynerMedia and ad-tech company MNTN are media and brand engagement partners, respectively.

How it works: Telly's set features two screens that are connected by a soundbar in a single chassis.

• The all-in-one set features a main 55-inch TV screen, with a second screen below it that runs the same width but is only the height of an iPhone.
• The second screen can either show advertising that is designed to be relevant to what is playing on the main TV screen or act as a widget that can display local weather, news headlines, sports scores and betting lines from places like DraftKings and FanDuel.

The big picture: Telly is the second new entrant in the TV market this year, joining Roku, which launched its own branded smart TVs this spring.

• "TV companies have hit a commodity state, where every TV is pretty much the same," Pozin tells Axios. Even though the TV is being given for free, Pozin is adamant that Telly isn't a cheap TV set. "If we were to sell this TV, it would be over $1,000; it wouldn't work in the market."
• The idea is that consumers who get one of these TVs will never have to upgrade their hardware since the company will be consistently pushing through software updates.
• "We believe that's how a TV company should be run: more as a software company than a hardware company."

What's next: Telly plans to send out 500,000 TVs this year and "multiple millions" by the end of next year.