China’s LeEco plans US listing in 2019 as part of global expansion
Chinese internet giant LeEco plans a US public listing in 2019 as part of a strategy to crack the US consumer market and eventually develop itself into a global brand, according to a company executive.
“Our strategy allows for us to globalise, and to be a global company we need to go for that US listing in the future,” said Winston Cheng, global head of corporate finance and development at LeEco Holdings.
“We’ve hired a great finance team who’ve come on board in the last months, putting financial control processes in place. It’s not easy work for us because we’re moving so fast … we’re a very capital-intensive, high growth business,” Cheng added.
Earlier this month, LeEco conducted a high-profile US launch in San Francisco, unveiling its hardware and ecosystem products to the world’s largest consumer market. LeEco hopes to become one of the few Chinese hardware makers to successfully mount its television sets in the living rooms of many North American consumers.
The company typically sells its televisions and smartphones at a subsidised price and bundles several months of free subscription to its OTT video-streaming platform, in the hopes that consumers will continue paying for a content subscription later on.
In China, where LeEco produces much original content, the business model has proven to be lucrative. In 2015, the company had 12 million paid subscribers for its content platform.
“The US is a market with high average revenue per unit, and consumers are very willing to pay,” Cheng said. “They pay a lot of money to cable providers … for content. The economics are much better than China.”
But the challenge that LeEco must overcome in the US is the competition it faces against content giants such as Netflix, Hulu and Amazon.
Netflix, for example, has already amassed a sizeable following and is the original distributor of hit TV shows such as House of Cards, Orange is the New Black and Stranger Things. Netflix currently has over 40 million subscribers in the US, more than three times that of LeEco’s paid subscribers in China.
LeEco has partnered with companies such as MGM and Lionsgate for its content in the US, and is reportedly in talks with Netflix for a content partnership.
Cheng admitted that while LeEco’s content at this point of time is “interesting” for the US market, it still has some way to go before it reaches the same level as the bigger content players.
“Is [our content] competitive against a strong player that’s been [in the US] for many, many years? Probably not yet, but we’re getting there.”
Cheng emphasised that LeEco has plans to create online series and big-screen movies, but that’s “not going to come overnight”.
“We need to make sure that our [televisions] get to the consumer. Once a TV gets onto the wall, it’ll stay for four to five years. So we’ll have that period to be able to monetise.”
The company acquired US television manufacturer Vizio in a US$2 billion deal in August to aid its expansion plans in the North American market. The deal gives LeEco an instant foothold in the US market, since Vizio has the second-largest market share in terms of televisions after Samsung.
Entering the US market is in line with the company’s dual core market strategy, Cheng said. The company’s chief executive Jia Yueting said at the launch this month that he hopes to succeed in the US market, before moving on to expand into the rest of the world.
“If we are able to solidify our positions in China and the US very strongly … that’s a pretty large market potential already,” Cheng said.
Moving forward, LeEco also has plans to enter western Europe – a market that neither LeEco nor Vizio has operations in, Cheng said.
But Cheng was quick to acknowledge that plans to enter Europe will only happen when LeEco has cracked the US market.
“We’ve got to get North America right, it’s a huge commitment. Getting the US market right will prove our model significantly,” Cheng said. “Only then I think we’d move through the hoops [to western Europe].”