The brand you’ve never heard of is going to be everywhere soon.
Earlier this week, LeEco made its first major investment in the U.S. electronics segment with the acquisition of TV maker Vizio for $2 billion. Vizio is the second-largest TV vendor in the U.S. with a market share of 20%. While LeEco is a relative unknown in Western markets, it has a huge presence in China, and is making inroads into the Indian mobile segment.
To get an inkling as to why a phone company bought a TV maker, you’ll need to know about LeEco’s unique business model. LeEco isn’t your traditional phone manufacturer. The brand started out as a video streaming service and is often dubbed the “Netflix of China” even though it started investing in original programming three years before the launch of Netflix. LeEco’s diverse content portfolio is the main reason for its acquisition of Vizio, as the move gives the Chinese brand a foothold in the U.S. market for its streaming, internet TV, and cloud-based services. The acquisition allows Vizio to expand its global presence by leveraging LeEco’s distribution and localised content streaming services.
LeEco isn’t just into phones and TVs either. The vendor debuted an autonomous electric car called the LeSEE earlier this year, and has invested in California-based electric car maker Faraday Future. To date, these are the segments LeEco is doing business in: smartphones, smart TVs, video streaming, music streaming, live sports broadcasts, film production, cloud storage, electric cars, smart bikes, and even real estate.
Coming over to phones, LeEco is the first brand to eschew the ubiquitous 3.5mm jack for USB-C audio in its 2016 offerings, the Le 2 and Le Max 2. The vendor has announced that it will launch its first phone in the U.S. market later this year, but before it does that, it is looking to partner with content providers for its music and video streaming services.
LeEco’s phones for 2016 are the budget Le 2 and the flagship Le Max 2. Both phones offer USB-C audio, and very compelling hardware for the price. Highlights of the Le 2 — which retails for the equivalent of $150 in India — include a 5.5-inch Full HD display, Snapdragon 652 SoC, 3GB of RAM, 32GB storage, USB-C, and a 3000mAh battery.
The Le Max 2 retails for what amounts to $340, and for that amount you get a 5.7-inch QHD display, 2.15GHz Snapdragon 820 SoC, 4GB of RAM, 32GB storage, 21MP camera, USB-C, and a 3100mAh battery. There’s a model with 6GB of RAM and 64GB storage that sells for $440, or $40 more than the retail price of the OnePlus 3.
|Category||Le Max 2||Le 2|
|Operating System||Android 6.0 Marshmallow with EUI 5.8||Android 6.0 Marshmallow with EUI 5.8|
|Display||5.7-inch Quad HD display||5.5-inch Full HD display|
|SoC||2.15GHz Snapdragon 820||Octa-core Snapdragon 652|
|Rear Camera||21MP camera with Sony IMX230 sensor
|16MP camera with PDAF|
|Connectivity||Dual-SIM, LTE, Bluetooth 4.2 Wi-Fi ac||Dual-SIM, LTE, Bluetooth 4.2 Wi-Fi ac|
|Charging||USB-C with fast charge||USB-C with fast charge|
LeEco is able to sell phones for ridiculously low prices as it doesn’t rely on hardware to drive profits. The brand sees phones, TVs, and even cars as delivery systems for its digital content platform. To this end, the manufacturer rolled out a free hardware day in China earlier this year, where it gave away phones, TVs, and accessories for free to those buying content subscriptions. LeEco is committing to what it calls the “ecosystem era”, wherein hardware is irrelevant and consumers rely on content services to derive value from a particular device.
In 2015, LeEco managed to sell a modest 3 million handsets, but is forecasting 15 million sales this year.
Digital content ecosystem
In China, LeEco draws over 350 million monthly users for its digital content services, with the brand offering over 10,000 TV shows and 5,000 movies. The company started out as a video streaming service, but has since branched out into music, live sports, film production, and cloud storage over the course of the last five years. All of LeEco’s content services are bundled into a single package dubbed the LeEco Membership.
Le Vision Pictures
Le Vision Pictures is the sixth-largest film distributor in China, and the production house has financed and distributed several Hollywood movies in China, including * The Expendables* franchise. The studio is now co-producing The Great Wall, starring Matt Damon. The production house has offices in Beijing, Hong Kong, and Los Angeles.
With LeEco Drive, you get 5TB of cloud storage as long as you subscribe to LeEco’s digital content platform. The service is set to go live sometime later this quarter, and will be rolled out to Le 2 and Le Max 2 users through an OTA update.
Le Music is LeEco’s music streaming service. In India, the service is powered by Hungama, a local streaming provider that offers a catalog of 9.5 million songs. The catalog is much more extensive in China, where it is one of the largest streaming services available.
Le Vidi is LeEco’s video recommendation service, which offers a curated YouTube feed with a smattering of content from LeEco’s partners. In India, that includes movies from Eros Now, a provider of regional movies.
As the name suggests, Le Live delivers live TV to your phone. The channels that you’ll be able to view are tailored for your region, and LeEco is also planning to stream live from music festivals.
LeEco has invested nearly $1.35 billion in LeSports, with the venture now valued at $3.3 billion. The service has exclusive streaming rights to the Chinese Super League for two years, a three-year deal with the Major League Baseball to stream baseball games in China and Hong Kong, and live broadcast rights to the English Premier League in Hong Kong until 2019. LeSports also has broadcast rights from FIFA, UEFA, the ATP, NFL, and the NCAA.
LeEco sold 2.85 million TVs in China last year, earnings $86 million on sales of $2 billion. The brand already offers TVs directly in the U.S. via its LeMall website, selling over 30,000 units in the first week of its debut. The Vizio acquisition will allow LeEco to get its content ecosystem on the second-largest TV manufacturer in the country.
Furthermore, with most of its ecosystem bets envisaged for the long-term, the TV business is one of few areas where LeEco is making profits right now.
Faraday Future and Aston Martin
LeEco is also a major investor in Faraday Future, and the platform developed by the California company for its EV will be used by LeEco in the LeSEE.
Earlier this year, LeEco partnered with Aston Martin to roll out the Internet of the Vehicle in-car infotainment system. The brand is also working with the luxury car maker over the development of the RapidE electric vehicle, which will offer a power output equivalent to 1000bhp.
While LeEco is betting big on electric vehicles, some have questioned whether the brand will be able to deliver a consumer-ready vehicle given the sheer amount of money it takes to develop a car from the ground-up. Even if there’s no clear timeline as to when we’ll see an electric car from LeEco, the company has done a remarkable job of vertically integrating its services in such a short period of time.