Bottom line: LeEco’s new US launch for its TVs, smartphones and video service is almost guaranteed to fail due to underwhelming product offerings and stiff competition.
A year after opening its US e-commerce site, online video superstar LeEco (Shenzhen: 300104) has finally launched some of its leading products in the world’s biggest but also one of its most competitive markets. LeEco, formerly known as LeTV, announced it will start selling its smartphones and smart TVs in the US, as well as a new customized version of its core online video service. My main response to this aggressive and ambitious push is: Good luck!
I’ve been a big LeEco doubter for a while now, since the company has gone from relatively obscurity to superstar in just a couple of years through a series of aggressive expansions fueled mostly by taking on new investors and selling its overvalued stock. Its name change from LeTV to LeEco nicely summarizes its aspirations, since the company now bills itself as developer of an ecosystem that delivers entertainment content over a range of devices and services.
LeEco began its life as a smart TV seller, using a savvy business model that saw it sell its Internet-ready TVs at relatively low prices to buyers who agreed to sign up for its core video service. Since then it has moved into smartphones, and is also trying to develop its own smart cars.
The smart TVs and smartphones will both become available for US buyers under its newest launch, which was announced at a gala event in Silicon Valley where LeEco hopes to build a major campus that will someday house 12,000 employees. (English article; Chinese article) LeEco will also offer a version of its online video service for US consumers, featuring both free and paid content.
A visit to the newly relaunched US site at us.lemall.com shows 3 smartphone models are now available, ranging from $249 to $699. A high-end TV sells for a relatively steep price tag of $4,999, though buyers who sign up for LeEco’s loyalty club will be able to get the product for $3,999. The site also offers a bicycle model, as well as several smartphone accessories. The new phones and TVs will go on sale November 2.
I found it somewhat amusing that LeEco’s charismatic chief Jia Yueting has slightly tweaked his name for the big US launch, with local media now referring to him as YT Jia. I’m sure the change was made at the advice of a high-priced PR consultant, who probably said the YT designation would be easier for US consumers and product reviewers to remember, which is true.
But the fact of the matter is that no amount of PR consultants will be able to prepare LeEco for this extremely competitive market. The company’s smartphones have received a very lukewarm reception here in China, and they’ll face an even more uphill climb in the US due to stiff competition from local giant Apple (Nasdaq: AAPL), as well as Korean giants Samsung (Seoul: 005930) and LG (Seoul: 066570). LeEco’s phones will also be at a disadvantage in the US due to lack of local carrier partners, since carriers like AT&T (NYSE: T) and Verizon (NYSE: VZ) are responsible for a large volume of sales in the market.
The TV and video offerings look equally weak, since LeEco will face huge competition from cable TV operators like Comcast (Nasdaq: CMSCA) and other Internet-based operators like Hulu and Netflix (Nasdaq: NFLX). LeEco did sign up at least one major content providing partner for its latest initiative, Hollywood studio Lionsgate. But it will take more than that to win over US consumers.
At the end of the day, there’s a reason that most of China’s fast-rising Internet companies and gadget makers have largely avoided the US to date, and opted instead for less competitive markets like India and Russia. I do have to commend LeEco for being brave enough to launch such a major initiative. But I can also say with almost 100 percent certainty that this drive is guaranteed to fail due to competition and LeEco’s own weak lineup of product offerings.
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