As LeEco's non-listed businesses shrink, can it preserve its small TV ecosystem?

After Liang Jun was promoted to general manager of LeTV (300104.SZ), he promoted four senior executives from within the company yesterday (June 14), indicating that the listed company LeTV will further focus on color TVs in the future.

At the same time, LeEco's other sub-ecosystems are shrinking. However, with the added value decreasing and the panel cost rising, can the shrinking LeEco maintain its small ecosystem of TV, film and video?

Listed companies mainly focus on color TV

On May 21, Jia Yueting resigned as general manager of LeTV.com. Liang Jun, president of LeTV Zhixin, whose main business is television, succeeded Jia Yueting as the new general manager of LeTV.com.

After taking office, Liang Jun took back the sales rights of LeTV TV from LePar, and opened up the research, production and sales chain of the TV business at the listed company level. This time, he promoted several senior executives in LeTV Zhixin.

Ren Guanjun, the former vice president of marketing and communication of LeTV Zhixin, was promoted to senior vice president of marketing and communication of LeTV.com and concurrently CMO (chief marketing officer) of LeTV Zhixin. Two other old subordinates of Liang Jun in LeTV Zhixin were also promoted this time: Lian Lei was promoted to director of human resources of LeTV Zhixin; Liu Xiaopeng was promoted to senior director of finance of LeTV Zhixin.

Moreover, LeTV color TVs are back on the offensive, and recently they have been slashed in price for promotion. Liang Jun said that in the future development of LeTV, he is particularly concerned about four aspects: first, maintaining advantages in terminal business; second, realizing content monetization; third, forming an open closed loop of LeTV ecosystem; and fourth, organizational reform and efficiency improvement.

He also said, "The outlet for video monetization is more on TV, and the channels are through TV sales and membership marketing. In addition, membership operations can also support the development of TV business and support listing business."

The implication is that LeTV Video, LeTV TV, and membership operations will interact more closely; at the same time, LeTV TV's content is not limited to LeTV Video, and can cooperate with other video providers. Of course, LeTV Video does not only serve LeTV TV, but can also serve other TV brands. But in the end, the terminal TV products need to increase sales, the content needs to be monetized to gain profits, and the management efficiency needs to be improved, the goal is to achieve scale profitability for LeTV TV and LeTV.com.

In fact, television has become LeTV's largest source of income. Liang Jun will further focus on building LeTV's TV business after taking up his new position.

Non-listed business shrinks

Listed companies focus on color TV business, while non-listed companies shrink their business lines to include LeEco Finance, mobile phones, automobiles and other fields. This is also the change of LeEco in the post-Jia Yueting era after Sunac, owned by Sun Hongbin, invested 16.8 billion yuan in LeEco.com, LeEco Zhixin and LeEco Pictures.

In early May this year, LeEco Holdings withdrew from the investment in Lancai.com, which was only nine months after LeEco Holdings led the 180 million yuan B round of financing for Lancai.com last year. LeEco was once ambitious in the field of Internet finance. Last year, it also planned to jointly establish Xinwo Property Insurance Co., Ltd. with Xinwo Capital, O-Film, Clou Electronics, and Shimao Group. However, in January this year, Shimao Group announced that the parties had not reached a consensus during the preparation process, and Shimao Group had terminated its participation in the establishment of Xinwo Property Insurance.

LeEco Finance, which Jia Yueting once regarded as a platform to integrate resources from various sub-ecosystems and leverage the effect, has also gradually faded from its rapid development. In August 2015, Wang Yongli, former vice president of the Bank of China, became the CEO of LeEco Finance. In May this year, Wang Yongli resigned during the consolidation phase of LeEco Finance's "Five-Year Plan and Three-Step Plan", and Yang Xinjun took over as the CEO of LeEco Finance.

The mobile phone business is also shrinking. Coolpad, of which LeEco is the largest shareholder, announced its 2016 financial report on May 31, 2016, with a loss of HK$4.21 billion. The news that Coolpad terminated the contract with the fresh graduates it had hired was also exposed. The cloud storage service of LeEco Super Phone will also be stopped from June 30 this year, and it will no longer be able to provide cloud photo album and other services.

LeTV Sports has been losing ground in copyright. Since the beginning of this year, LeTV has successively lost the new media broadcasting rights of the Chinese Super League and the Asian Champions League. In May this year, LeTV Sports announced that Sino-Italian Ningbo Eco-Park and others participated in LeTV Sports' B+ round of financing. LeTV Sports' new strategy has been adjusted to "sports town". LeTV Sports President Zhang Zhiyong and Chief Operating Officer Yu Hang both resigned in February this year.

Even Jia Yueting's favorite LeEco Auto has slowed down. Faraday Future (FF), an American auto startup in which Jia Yueting holds a stake, has stopped production at its North American factory. In March this year, Ding Lei, co-founder of LeEco Auto, resigned from his positions as global vice chairman of LeEco Supercar and CEO of China and Asia Pacific. Jia Yueting's stake in Lucid Motors, an American auto startup, is also up for grabs.

Jia Yueting admitted that LeEco had developed too fast in the past and the funds could not keep up. Now, LeEco, which has been expanding rapidly, seems to have braked suddenly on the highway. The biggest problem is that LeEco, which used to "transfuse blood" to LeEco's huge ecosystem, recently had its 2 billion bond issuance plan rejected by the China Securities Regulatory Commission, and after Sun Hongbin injected capital, LeEco set up a "firewall" between LeEco and non-listed companies.

Can the TV ecosystem remain stable?

Currently, LeTV.com is planning a major asset restructuring, intending to acquire LeTV Pictures, a subsidiary of LeEco Holdings. The reason why LeTV.com has repeatedly postponed the announcement of its asset restructuring plan is also related to the difficulties encountered by LeTV Pictures. Compared with the popularity of the movie "Tiny Times" released a few years ago, LeTV Pictures has recently encountered the problem of poor box office performance of new films.

Content has always been one of LeEco's trump cards. However, with the slowdown in the Chinese film market, LeEco Pictures needs to come up with more innovative measures to truly improve the quality of its films in order to maintain its high valuation.

As June 18 approaches, Liang Jun announced that LeEco will resume a substantial price cut for its TVs, with some products dropping by as much as 3,000 yuan. However, from the current perspective, after LeEco shrinks its other fronts, it faces at least three challenges in maintaining or further strengthening its small ecosystem of TVs, films, and videos.

The first challenge is hardware profitability. The rapid growth of LeTV TV sales was the main reason for LeTV's rapid revenue growth last year. At the same time, LeTV's strategy of selling TV hardware at a loss also became the main reason for LeTV's net profit to decline for the first time in many years. Since Jia Yueting reflected on LeTV's over-rapid expansion in November last year, Liang Jun publicly stated this year that LeTV TV would reduce losses this year.

In fact, the cost of TV panels has continued to rise since the beginning of this year. If LeTV TV continues to expand sales with a loss-making model for hardware, even if the sales target of 7 million units is achieved this year, it will be more difficult for its TV business to reduce losses and turn losses around. You can't have your cake and eat it too. How Liang Jun balances this is one of the challenges.

Secondly, there is the challenge of reduced content added value. Many users buy LeTV TVs for the content resources of LeTV Sports and LeTV Pictures. As LeTV Sports' copyright investment decreases, its content appeal and differentiation will decrease. Another important point is that LeTV's membership fee generally encourages users to buy for a few years during promotions. Only by constantly attracting new users to become LeTV members can LeTV's membership income continue to grow. How to activate the value of the large screen is another challenge for Liang Jun.

The third challenge is the channel. LeTV TV was previously sold by LePar, and LePar has been actively developing offline dealer partners in the past two years. LeTV Holdings' incentive options are one of the conditions for attracting dealers to join. A LePar partner in Maoming, Guangdong, told the First Financial reporter that he sold LeTV TV last year, but not this year to prevent risks. The dealer believes that LeTV TV is still competitive, but LeTV's mobile phones, financial products and other products still need to be observed.

As LeTV's mobile phone business shrinks and the sales rights of LeTV TV are taken back by Liang Jun, the future direction of LePar is somewhat worrying. If LeTV TV reduces its reliance on LePar and makes more use of social channels, can it still maintain its previous advantage of low channel costs? This is also a big challenge for Liang Jun.

However, Dong Min, vice president of AVC, believes that LeTV Video, LeTV Pictures and LeTV Zhixin are the main businesses of the listed company, especially the TV operated by LeTV Zhixin is LeTV's mature business and core asset, and is also the business that Sun Hongbin focuses on investing in. At present, LeTV's adjustments include changes in governance structure, division of business lines, and arrangement of personnel organization, all of which are aimed at making the core business bigger and stronger and restoring the value of the listed company.

In terms of the TV business, the company has been affected by other ecosystems in the short term, and its performance has fluctuated. However, LeTV has already established a certain foundation for the construction of its TV and content brands, and its channel and product layout are gradually getting on track, and its scale has also reached a certain level. Therefore, Dong Min believes that in the long run, LeTV's TV business can be expected to develop healthily. For developing businesses such as LeTV Video, LeTV Pictures, and LeTV Cloud, due to the market's competitive landscape, the maturity of its profit model, and LeTV's current position, it is still necessary to observe the selection of its specific strategic direction and the details of its implementation.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.