How to Boil the Ocean
Eddie Hold, President ;
Consumer Electronics Connected Intelligence
LeEco unveiled most of its U.S strategy Wednesday, announcing four TVs, two smartphones, a VR headset, a connected bike and the concept car that it previewed at CES earlier this year. The overall hardware strategy is to focus on high-end products with mid-tier pricing - in addition to the $2 billion Vizio acquisition the company announced this summer. But don’t mistake LeEco for a hardware company, as it is much more.
Rather, LeEco has historically been a content provider, delivering original content, a vast library of movies and live event streaming. The hardware play is really about providing multiple windows into the company’s content and while the majority of the existing content has been focused on the Chinese market, there are plans afoot to build a similar portfolio for the U.S. market. This content will be in-part through an array of partners – ranging from Lionsgate to the History Channel and many more – in addition to original content and increased event streaming.
But even this portrayal is not really accurate; what LeEco truly wants to be is a unifying ecosystem that allows content to move seamlessly between various devices allowing, for example, content to be switched from the phone to the TV (or to the car). And herein lies the boiling the ocean issue. To create an ecosystem of this size and scope takes an awfully long time and has several rather large, well known competitors such as Apple, Google, Amazon and Facebook, to name but four. In other words, this is a very bold strategy with long odds against its success.
But it could work. The company appears to have very deep pockets and knows that this will not be an overnight success. And, with that in mind, probably the best way to think of LeEco right now is as a hardware company first and foremost.
For the next couple of years, consumers will buy LeEco devices because they are well priced, with top-of-the-line features. The content alone – at least initially – does not differentiate the company enough to sway a consumer’s purchase decision. A year or two from now, with more compelling content, the company can enter Phase Two of the strategy and become far more of a content company. This will then slowly lead to Phase Three, when the company becomes an ecosystem.
The key to LeEco’s hardware strategy will be its mobile phone strategy. LeEco’s core target is the millennial, who is a phone-first user; however, the challenge here (and actually with all the hardware focus) is getting the devices into the hands of the audience. The initial focus is to sell via LeEco’s online LeMall, but a brick-and-mortar strategy will also be needed to ensure that consumers see the LeEco devices along with the myriad of alternatives. Best Buy, Walmart, and ideally, carrier stores will drive far more sales than an online-only strategy, even for the millennial market.
But it would be wrong to discount LeEco… at all. Yes, the retail strategy may need to be expanded, but that’s likely to happen over time. The theory behind LeEco’s strategy is a strong one, even if the pieces do not yet combine together to get the company there. If there is a possibility that an ocean could boil, I suspect LeEco would build the product suite necessary to at least start it all bubbling.
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