Startup Telly Plans to Give Away 500,000 Free 4K TVs This Year. The Catch? The Sets Have a Second Screen That Constantly Shows You Ads

Ilya Pozin made a bunch of money when Viacom bought Pluto TV, the free video-streaming company he co-founded, for $340 million four years ago. Since exiting Pluto about a year after that deal closed, Pozin has been working on another startup venture one he thinks will be a much bigger deal.

On Monday, Pozins brainchild, Telly, comes out of stealth after two years in development. Telly wants to ship out thousands (and eventually millions) of free 4K HDTVs, which would cost more than $1,000 at retail, according Pozin.

The 55-inch main screen is a regular TV panel, with three HDMI inputs and an over-the-air tuner, plus an integrated soundbar. The Telly TVs dont actually run any streaming apps that let you access services like Netflix, Prime Video or Disney+; instead, theyre bundled with a free Chromecast with Google TV adapter.

Whats new and different: The unit has a 9-inch-high second screen, affixed to the bottom of the set, which is real estate Telly will use for displaying news, sports scores, weather or stocks, or even letting users play video games. And, critically, Tellys second screen features a dedicated space on the right-hand side that will display advertising ads you cant skip past and ads that stay on the screen the whole time youre watching TV and even when youre not.

Telly is giving away the device completely free, said Pozin, the companys founder and CEO. The business will be entirely supported by advertising and affiliate revenue.

Read More: The Best 4K TVs to Buy This Year

The omnipresent ads on Tellys TVs makes them far more valuable than traditional video advertising, Pozin argued: Were not just running 15-second prerolls.

At some point, Pozin suggested, Telly users could place real-time sports bets on the second screen, or, say, order a pizza from Pizza Hut. (Of course, Telly would want to take a cut of each transaction.)

Telly on Monday launched its reservation system at freetelly.com, promising to start shipping the first 500,000 free TVs to qualifying U.S. consumers this summer. When you sign up through the companys app, Telly will ask for specific demographic, TV-viewing and lifestyle info, which the company will use to target addressable ads to individual households. The TVs also have a built-in sensor that can detect the number of people who are watching at any particular time. Pozin emphasized that all of Tellys features comply with privacy regulations.

Tellys bet is that it will be able to generate a return on the major upfront investment of getting its ad-enabled TVs in front of U.S. consumers. Its not clear how long it might take Telly to recoup the sunk costs of the free TVs. Pozin argues that the unusual business plan is a revolutionary step forward for both consumers and advertisers.

TVs are a commodity. Its a race to the bottom on price, Pozin said. Theres been no innovation in the industry.

Ilya Pozin Frazer Harrison/Getty Images Pozin wont say how much funding Telly, based in Sherman Oaks, Calif., has raised except that its seed round valued the startup at north of $100 million. Tellys investors include Rich Greenfield, a Wall Street analyst who also is general partner at venture-capital outfit LightShed Ventures; Gary Vaynerchuks Vayner Media; and several institutional and strategic investors, which Pozin wouldnt identify.

In a statement, Greenfield said, Telly is a huge leap forward, leveraging the explosion of the connected-TV ad market and the desire from consumers for greater control and interactivity that does not disrupt the TV viewing experience. The groundbreaking dual-screen design enables advertisers to completely reimagine the living room experience while providing consumers an incredible TV at the easy-to-say-yes-to price of free.

Telly also is working with connected-TV ad company MNTN to sell brands on the idea. In todays fragmented media landscape, we are always eager to identify breakthrough opportunities to reach new audiences, and now with Telly and MNTN, brands will be able to seriously level up their performance marketing strategy right there on the biggest screen in the house, MNTN founder and CEO Mark Douglas said in a statement.

Viewers can watch anything on Tellys top screen, including cable or satellite TV and streaming services through devices like the included Chromecast (or Roku, Amazon Fire TV or Apple TV players). The Telly TVs feature a voice assistant for control and navigation, as well as built-in Zoom video calling and a webcam. The sets also will initially offer 40-plus video games, from arcade classics to immersive multiplayer experiences, and include free motion-tracking fitness programs, according to the company.

In addition, Pozin said, the Telly TVs are field upgradable via over-the-air software updates, so the company can continue to add new features.

Tellys executive team includes chief product officer Sascha Prueter, formerly Googles head of product for Android TV; head of strategic partnerships Matt Katrosar (previously with Pluto TV and CBS); head of data strategy Bob Ivins (ex-Nielsen); and chief marketing officer Neal Tiles (former president of G4 and EVP of marketing at DirecTV).