LeEco – Priced to go.
LeEco’s real disruption is price.
LeEco launched its assault upon the US market with a glitzy but confusing press event where the real standout was the prices of its new devices.
LeEco is a Chinese media streaming company that is hoping to build upon its media heritage by creating an open ecosystem powered by the cloud and delivered through the phone, TV, VR, Bicycle and the car.
It already has some traction in China with its media assets and it is this heritage that it is attempting to leverage into the US market.
The company has correctly identified that no one is really able to make different device categories work together in a seamless and fun to use way.
This, it hopes to fix with its LeCloud platform which drives the EUI user experience on all the devices the company offers.
Here the degree of data integration and the AI that it has running its recommendations as well as look and feel will be critical to driving engagement.
To get the ecosystem into the hands of users LeEco launched a series of devices including phones, TVs, bicycle, VR and a car.
However, the ones that really matter are a high end Android device (LePro3) coming at $399 and an 85-inch (uMax85) TV coming at a staggering $4,999.
These prices can be reduced still further by signing up to be part of LeEco’s UP2U membership program which gets the user $100 off the device and $1,000 off the TV.
The idea of UP2U is to drive engagement with its media consumption assets and to use the data generated to improve the quality of its service as well as to define its future roadmap.
This combined with limiting itself to selling over the Internet in the first phase of its development is how it hopes not to lose vast sums of money from selling these devices at such low prices.
LeEco is following the Amazon model of almost giving the devices away with the hope of making a return by selling content and services over its platform.
In this regard it has added an interesting twist which is allowing its platform to be open such that anyone can sell their content and other device makers can make use of it.
This completely rules out any chance of ever making a return on the hardware as the ecosystem will never be exclusive to LeEco devices but there is an opportunity in the ecosystem.
However, it is here in the ecosystem where LeEco’s vision falls short.
The average user in developed markets spends just 10% of his time engaged in media consumption meaning that LeEco is ignoring 90% of the opportunity.
Furthermore, the TV is not a driver of the user purchase decision when it comes to selecting an ecosystem which is why LeEco has to sell this product at such a good price and encourage engagement with further discounts.
LeEco has a reasonable line up of launch partners for its media consumption offering including Lionsgate, Netflix and Showtime but there are a notable number of exceptions.
This means that purchasers of the TV and the phone will still need to go outside of its ecosystem to get access to things like YouTube, Facebook video, HBO and so on.
Edison research indicates that to have a viable ecosystem in its own right LeEco will need 100m users outside of China and 300m to make real money.
However, if it manages to generate real engagement with those that buy its devices then these numbers could be lower as it will be supplementing the network effect through the revenue share that it will get from selling content.
This is going to be a tall order as developed markets are already well penetrated with media consumption offerings meaning that EUI will need to be compelling to create the stickiness from which LeEco can earn a return.
This is why the key metric to watch is not necessarily the number of devices it sells but whether those users engage with its software and content assets.
This is where Edison’s 7 Laws of Robotics will be crucial as a good score against these measures will give a good indication as to whether users will like the service.
This is where Xiaomi has fallen over as engagement with its ecosystem is weak meaning that users buy its products in China and then use the ecosystems of the BATmen.
LeEco has given users plenty of incentive to try the service but whether it can get them to stay is another matter.
Hence, the real beneficiaries of these launches are Google, Netflix and Qualcomm.
Google and Netflix benefit by having more capable hardware in the hands of more users and Qualcomm benefits as it has supplied most of the hardware differentiation that LeEco is using.
Whether LeEco can also benefit remains to be seen but it is certainly putting its money where its mouth is in pulling out all the stops to get users to try its products.
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