LeEco’s Big Vision for the US Needs Fleshing OutReading Time: 4 minutes
Chinese consumer technology and content company LeEco held its US coming-out party on Wednesday, introducing several new products to the US market for the first time and articulating its strategy for this most challenging of markets. It’s certainly not the first Chinese company to attempt to break into the US but, for most of the others, it’s either been a dismal failure or a long, hard slog with only modest success to show for it. What we got on Wednesday from LeEco was long on vision and buzzwords but with relatively little meat on the bones from the perspective of execution.
From LeTV to LeEco
LeEco has a complex company structure and an interesting history. It was originally LeTV, an online streaming service in China but changed its name to LeEco last year as it began to build what it describes as an ecosystem bringing together hardware, software, and services. However, where others pushing a similar vision tend to put hardware at the center of the vision, LeEco puts content first. That’s been the core of its strategy in China, building loyalty to its content services and then parlaying that into a presence in devices. It looks likely to be the thing that will set it apart the most in the US, too. No Chinese company coming to the US has yet tried a content-first strategy and the reasons are obvious: the content that works in China is very different from what will attract consumers here in the US.
To that end, LeEco has apparently signed lots of partner agreements with major Western content providers – a slide flashed up briefly at the event had names like Magnolia Pictures, MGM Studios, Showtime and others on it, while Lionsgate and Vice Media executives briefly spoke on stage. But it’s far from clear yet how this content will actually show up on or add value to LeEco’s devices. There will be an EcoPass subscription at some point but neither pricing nor all the content included have been announced yet (there will be a follow-up event on November 2nd to announce an additional content partner beyond the Fandor movie streaming service already announced). Two other video apps – one referred to inconsistently as either just “Le” or LeApp and the other as either Live or LeLive – were also discussed and it appears these are bundled into the devices and will offer additional content, though it’s not clear yet exactly what that content will be.
Given how critical content is to the LeEco value proposition, this was an odd omission. It suggests that, even though LeEco’s vision may be grandiose, its current ability to execute on that vision is a little pedestrian in comparison. That’s a shame because, although the value proposition is a challenging one, it is at least unique and could be effective if delivered in the right way.
Branding and marketing
Aside from the unfinished content story, LeEco’s other big challenge will be branding and marketing. Today, the brand is entirely unfamiliar to US customers, although the company did acquire TV maker Vizio recently. Unless that changes, none of the ecosystem or other benefits the company talked up on Wednesday will make any difference, because no one will ever know about them. LeEco talked up the economic benefits of its direct sales model (its LeMall website is a sort of single-brand Amazon) in terms of cutting out middlemen and reducing marketing and branding spend but the big disadvantage of going online-only is customers won’t encounter the LeEco brand in familiar stores. Vizio TVs will presumably continue to be offered through third-party distribution but it’s less clear that LeEco-branded devices will be.
The other major Chinese consumer tech companies have used both wireless carrier relationships and sponsorships of sports teams and events to gradually familiarize US consumers with their brands but it’s unclear whether LeEco has any similar plans. Starting from the ground up without either third party distribution or a massive brand awareness campaign seems like a recipe for failure. It doesn’t help that, as executives joked on stage, the “Le-” prefix conjures up misleading French associations, as well as being plain awkward when it’s so widely and inconsistently used (some sub-brands use the Le prefix joined to a word, like LeEco, while others use it as a separate prefix, as in the Le Pro3 phone, while the Eco element is used separately in lower case names for product lines like “ecophones” and “ecotvs”).
Though the ecosystem itself is more fully fleshed out than is typical from companies just entering the market, it’s still not clear what the on-ramp for consumers will be. It appears the LeMall e-commerce site is one such entry point but when US consumers have never used any LeEco products and that’s all the site appears to sell today, it’s not obvious why people would go there in the first place rather than to a more familiar site like Amazon (or even BestBuy.com or Walmart.com). When it comes to content, it appears the various offerings are all tied to device purchases, which makes that a tough entry point as well. It might be a lead generator were it available as a standalone app or a service users could try on their existing devices.
A fascinating new player
As you can tell from everything above, I’m rather skeptical LeEco can make a big dent in the US with what we saw outlined on Wednesday. However, what’s clear is the company is committed to the US in a big way – it’s already hired hundreds of employees and apparently intends to hire thousands more and the big flashy launch event was another sign it’s serious about the US market. The content partnerships are also impressive for a company that’s never done business in the US in a meaningful way. The focus on creating an ecosystem rather than a pure-play low-cost consumer electronics play is perhaps the most unique aspect of the LeEco proposition. In short, there’s lots here that makes LeEco a very interesting player to watch – certainly the most interesting to enter the US market for some time. While I’m bearish for now, much of what I’ve written above will be subject to revision as LeEco fleshes out its strategy, perhaps addressing some of my concerns as it goes. For now though, it’s certainly worth watching as the company begins to execute on its vision for success in the US.