The ambition of Chinese firm LeEco continues to amaze. The company, which has businesses covering the likes of online video, video production and distribution, smart devices, automobiles, and e-commerce platforms, held a high-profile product launch in San Francisco on October 19, 2016.
Due to become available on November 2, 2016, exclusively on its own portal LeMall, LeEco launched an 85" 4K UHD TV with HDR capabilities and Android TV for $4,999; two smartphones, LePro 3 ($399) and LeS3 ($249), featuring the latest Qualcomm Snapdragon and Quick Charge technology and a 16MP camera; a VR headset; a connected bike; and a futuristic connected car concept to feature in the next Transformers movie.
As a major market differentiator, LeEco devices will come with bundled access to content from its LE app. The content offering comes from LeEco Live video platform, with partners including MGM, Lionsgate, Vice, Showtime, Sling, and Magnolia Pictures. LeEco has also developed its own content, including the upcoming film The Great Wall, and recently acquired production company Dichotomy Creative Group, run by former Paramount Pictures president Adam Goodman.
LeEco's core strategy is to export its "Le Ecosystem," a vertically integrated device, application, and content platform, to global markets to take its total revenue in 2016 into the RMB50–60bn range ($7.5–9bn), with annual sales of $10bn.
LeEco is a content company first. It has 750 million monthly active users on LeEco.com and holds the broadcasting rights in China to over 300 worldwide sports events, 5,000 movies, and 100,000 TV episodes. Smartphones, TVs, and VR headsets are increasingly seen by consumers as accessories to content consumption, transferring value perception away from device brands to service providers. Therefore, the device-as-a-service business model, where the device and content offering are blended and designed together, makes sense, especially in a market such as the US. Increased consumer loyalty and ongoing revenue streams brought by monthly subscriptions are a few key advantages to this model.
However, LeEco lacks experience in managing a devices business; it has sold only smartphones for the past two years, mostly in China where online open channels dominate. The lack of carrier distribution, or any distribution other than its own channel (i.e. LeMall), is a major concern – not a single smartphone vendor successfully made it in the US without the support of at least one carrier. Making a great premium phone alone has never been sufficient.
LeEco plans to overcome this by undercutting the competition and pushing people to register to its website by offering $100 rebates and three months of free unlimited access to LePass, LeEco's video subscription service, with any smartphone purchase in November 2016. Also, LeEco is offering $1,000 and one-year free access with any uMax85 4K TV purchase. However, post-November prices will be more important for the long-term success of LeEco in the US. There are questions about how much LeEco will charge for LePass subscription and what content will be featured and when. These are key questions yet to be answered. Sports content is also notably absent from LeEco's offering. A major content deal, which will be announced at the launch on November 2, 2016, may address this.
Such high subscriber-acquisition costs and local asset building means that LeEco is here for the long game, which should be justification enough to get Apple, Amazon, and Netflix worried. As LeEco's CEO Yueting Jia said: "True disruption happens when 99% of people don't believe it."
Consumer IoT Profile: LeEco, TE0004-001095 (September 2016)
Ronan de Renesse, Practice Leader, Consumer Technology
Europe, Middle East & Africa team - +44 (0) 207 017 7700
Asia-Pacific team - +61 (0)3 960 16700
US team - +1 646 957 8878
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