Next TV

It’s Wait and See for LeEco

Six months after Vizio buy, Chinese firm still seeks U.S. TV foothold 1/30/2017 8:00 AM Eastern

When LeEco SAID in late July that it was buying Vizio — one of the top U.S. TV brands — for $2 billion, the Chinese technology giant struck a confident tone that the acquisition would be approved before 2017.

 

LeEco followed up with a mid-October U.S. launch event, showcasing its first branded entries in the crowded 4K TV market, along with new smartphones, and new content partnerships. An early November press event in New York saw the company show off its new smartphone-enabled headset, the Explore VR.

 

Yet around the same time LeEco was touting its VR hardware, a letter from company co-founder Jia Yueting to employees struck a worrisome tone: LeEco was running out of cash and expanding too fast.

 

“We blindly sped ahead, and our cash demand ballooned,” the letter read, according to a Bloomberg report. “We got over-extended in our global strategy. At the same time, our capital and resources were in fact limited.”

 

It wasn’t just Vizio and LeEco’s play for expansion into the U.S. TV market: smartphones, VR and electronic vehicles have all been major LeEco investments in the last year. Billions alone had been invested in the company’s car endeavors.

 

With LeEco’s stock down nearly 40% in six months, the company saw its shares halted from trading Dec. 7 on the Shenzhen (China) Stock Exchange.

 

A CES BREATHER

 

The LeEco booth at the 2017 CE S in January may have been testament to the unfocused nature of the company.

 

Giant Ultra High-Definition (UHD) 4K TVs were in every corner, yet it was a sleek, self-driving, electric concept car that took up the bulk of everyone’s attention. LeEco’s VR hardware was relegateed to a small corner, while two “smart” bicycles were given prime placing.

 

Kenny Mathers, general manager of product marketing for LeEco, was insistent at CE S: LeEco is entertainment first. And the Vizio acquisition is paramount to the company’s plans. He told Next TV the company’s initial foray into the U.S. market with its TVs in October showed promise, with the company selling out the first few batches of 4K sets it made available.

 

But those sales came exclusively via LeEco’s web site (LeMall.com), and Mathers acknowledged that reality. “For us, 2017 will see expansion [of LeEco products] to big box retailers, [including] Target, Best Buy and Amazon. We’ll be doubling down on partnerships. And we’ll be adding to our own content offerings,” he said.

 

On the retail side, the company has made progress. LeEco’s line of smartphones were made easily available via Best Buy and Target brick-and-mortar stores beginning in December, and in mid-January LeEco’s UHD TVs first began showing up for U.S. consumers outside of the company’s online store, with Amazon offering three of the company’s UHD TV models.

 

As for launch partners, new owners of LeEco devices — both TVs and smartphones — have free access (between three to six months, depending on the device) to DirecTV Now, AT&T’s nascent streaming service, which offers 100-plus channels (temporarily offered for a $35 per month promotional price).

 

In terms of overall content, though, LeEco’s embedded offerings for U.S. owners of its new products have been limited. So far, highlights include unlimited viewing on indie SVOD movie site Fandor and discounts on content from LeEco’s partners, which include Sling, Machinima and Seeso. That’s a far cry from the 5,000-plus movies and 100,000-plus TV episodes LeEco touts with its streaming service in China.

 

That streaming service — Le.com — has been dealing in online content distribution for more than a decade, and LeEco’s business model there has been to sell its hardware at or below cost, with the hope that customers join the company’s content ecosystem.

 

LeEco knows that what’s worked in China won’t necessarily work in America, Mathers said. But the Vizio acquisition will give the company the ability to try.

 

“[The U.S.] is a different beast, where it’s hardware first, a different model,” he said. “That’s what the Vizio acquisition gives us, a footprint in the U.S., an opportunity to stand out. [We can] be disruptive, make content first.”

 

A CASH INFLUX

 

On Jan. 13, LeEco received a lifeline: residential property developer Sunac China Holdings announced that it would invest roughly $2.2 billion in LeEco, in exchange for an overall 8.6% share in the company.

 

The deal gives Sunac a higher percentage in specific LeEco divisions, including a 15% share of Leshi Pictures, the company’s production arm. The cash influx brought LeEco stock back on the trading block (as of Jan. 16) … and it brought the Vizio acquisition back to light, with LeEco’s purchase still waiting on Chinese regulatory approval.

 

“Right now, we can’t share an official timeline on the Vizio acquisition as the process can take longer than anticipated with two government approvals,” a LeEco spokesman told Next TV. “We can confirm everything is on track in the process.”

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