How did LeTV, the much-questioned "story king", succeed in becoming an Internet TV company?

The press conference on September 19, 2012 was the beginning of Liang Jun’s “nightmare”.

This was the first show of Jia Yueting, the founder of LeEco, who copied Steve Jobs. Wearing a black round-neck T-shirt and black casual suit pants, Jia Yueting kept changing his gestures on the stage, desperately advocating how LeEco Super TV will subvert the industry - even though there was no product, no parameters, and only a PPT.

That day, Liang Jun, the operator of LeTV TV, was not the protagonist. He sat in the audience, silent, until the press conference ended and hurried back to the company.

The next day, LeEco resumed trading. As soon as the market opened, institutions swarmed out, and LeEco's stock price fell from 23.50 yuan at the opening to 22.80 yuan at the closing. No one believed this story. Various media voiced doubts, using the past experience of Google, Sony, and Microsoft to prove that LeEco TV would fail.

Investors were also getting anxious. Starting from that day, they came to LeEco's headquarters in TEDA Times Square on Guanghua Road and picked out all the LeEco executives they could find from the workstations that were like a large Internet cafe and mixed with various indescribable smells - of course, including Liang Jun, who was in charge of this "problematic business".

Liang Jun, who has an engineering background, was a bit taciturn. But at this time, he had no way to escape from the dozens of interviews a day. Even at lunch, he had to spend half of his time to appease the anxious and even angry investors.

However, this did not work. For nearly three months, LeEco's stock price was almost constant; by December 3 of that year, LeEco's stock price had fallen to 13.91 yuan, almost half of its price on September 20, when it resumed trading.

Everyone thinks LeTV is wrong.

But it seemed like God had played a big joke on us. The time went to November 2016. After Jia Yueting publicly admitted to the financial crisis on November 6, many businesses of LeEco were questioned. Rumors of layoffs emerged one after another, the stock price fell, and institutions fled. The LeEco empire was once again on the verge of collapse.

At the critical moment, LeTV TV, which he had personally labeled LeTV as a "PPT company", has become one of the few fundamental bright spots of LeTV. Jia Yueting also said that LeTV will stop strategic expansion, and starting next year, LeTV will form a positive cash flow, and the first profitable business will be LeTV TV.

In this way, LeTV TV has turned into an example of the "LeTV model": as the leader in the field of Internet TV, LeTV TV's sales of nearly 10 million units are not only LeTV's performance to appease the outside world, but also the starting point of Jia Yueting's confidence in venturing into the automotive industry.

Is LeTV's success at this stage a coincidence or a success of its model? Why have traditional TV manufacturers and other Internet companies such as Xiaomi failed to win in the field of Internet TV?

The battle of direction: from set-top boxes to TVs

Liang Jun joined LeTV in February 2012.

Before joining Lenovo, Liang Jun had worked at Lenovo for 16 years, and his last position was "Vice President of Product Development for Lenovo Smartphones", which had nothing to do with television. In fact, when the headhunters commissioned by Jia Yueting approached Liang Jun in 2011, they only told him to work on an Android-related set-top box project.

Liang Jun was very interested. In 2011, Android phones had just started to gain popularity in China, and Lei Jun launched the Xiaomi phone in August, which was considered to be a boost to the market. However, when it came to smart set-top boxes, the market was in a state of disarray, as the concept was still very unfamiliar at the time.

Liang Jun bought a box to try out the new technology. He no longer needed to buy discs to watch videos on the Internet. So, after several months of negotiations, Liang Jun finally made up his mind to resign and pursue the trend he was sure of.

When Liang Jun first came to LeTV, he had a long talk with Jia Yueting. Liang Jun told Jia Yueting that the direction of the set-top box was right, and that this was the direction of the future, and that the risk was small and there was nothing wrong with it.

"Where's the TV?"

"Television is too risky."

But unexpectedly, Jia Yueting's focus at that time was on television. Liang Jun still remembers Jia Yueting's repeated words at that time, "Apple's model for making television is absolutely amazing, and what makes us better than Apple is that we also have Internet business." Although Liang Jun, who is used to taking steady steps, always "does not recommend actively promoting" the television business in internal meetings, he has no objection to this sentence.

Jia Yueting's "Internet business" - LeTV, seems to have been doing something strange. In those years, LeTV has been trying to buy copyrights that are not expensive now. According to LeTV's 2012 annual report, by the end of that year, LeTV already owned copyrights for more than 5,000 movies and more than 90,000 TV series.

This was not easy to understand in the context of rampant piracy at the time. Around 2010, video websites were exhausted from forming alliances and collapsing one after another, but no survivors stood up; high bandwidth costs and weak advertising business made video websites anxious about their livelihoods, and it was really unrealistic to spend a large sum of money to purchase copyrights.

Jia Yueting is "going against the trend". Liang Jun just thinks that if the legitimate Internet content is put on a new high-definition large-screen terminal, it may be a good thing. But this statement has too many premises. After all, the era of advocating genuine products has not really arrived.

Even so, this is a direction that Jia Yueting has already made clear. However, it is still too difficult to enter the TV industry.

"After decades of fierce competition in the television industry, we don't have factories or technology, so investors will point at you and say that you Internet companies are just bragging." Liang Jun said that although OEM is so convenient now, there was no such thing back then.

Just as no one would have believed that an Internet team could make a mobile phone ten years ago, no one believed that an Internet team that started from scratch could make a usable TV five years ago.

A lucky break: Terry Gou impressed by his plan to defeat Samsung

At least in the first half of 2012, the set-top box team led by Liang Jun did not have too many extravagant ideas and was at ease making set-top boxes. Moreover, these set-top boxes were not Android at the beginning; one of the devices, called S11, was based on Linux and sold for as high as 2,980 yuan. The Android box project was still in preparation and had not been launched.

If it continues like this, LeTV today might still be the same LeTV as before.

Fortunately, things turned around.

In June of that year, Liang Jun and Jia Yueting flew to Taiwan to meet with Guo Taiming. At that time, Guo Taiming was meeting with Yang Xueshan, the vice minister of the Ministry of Industry and Information Technology. After asking a friend for help, Jia Yueting and Liang Jun were able to chat with Guo Taiming for five minutes during the break of the meeting.

During these five minutes, Jia Yueting catered to Guo Taiming's wishes and his words were full of criticism of Samsung, which is what Guo Taiming has hated all his life. At the same time, Jia Yueting described the ecological concept of content + hardware as a trump card to deal a heavy blow to the Samsung empire.

It is worth mentioning that at this time, the "content + hardware ecological concept" has already taken shape compared to the initial stage: on a low-priced, high-configuration smart TV, it provides a good user experience that only Internet companies can provide, as well as the genuine video content accumulated by LeTV over the years; especially through the latter, hardware buyers are converted into LeTV users for long-term operation.

Curious Terry Gou believed it.

It was at this time that Liang Jun felt for the first time that making television might be a success.

After returning to the mainland, Wang Chuan, who later took charge of Xiaomi TV, met with Liang Jun. At that time, Xiaomi mobile phones were at their peak. After knowing that LeTV wanted to make set-top boxes, Wang Chuan told Liang Jun that Xiaomi would also make set-top boxes soon and TVs in the future. "His meaning was very clear, that is, LeTV should stop doing it, you are not good at hardware anyway, just make apps."

Liang Jun didn't take it too seriously. He didn't really have any grudges against her, but he was just thinking to himself that he would always be ahead of Xiaomi in everything from now on.

Soon after, in late July, Terry Gou fulfilled his promise and sent a BG team; in September, the two sides officially formed a joint team. Thus, the 9.19 press conference took place.

But at this time, LeTV TV was still just a PPT. As Wang Chuan said, even compared with Xiaomi, LeTV's hardware was inferior, not to mention the old TV company that had been working for decades.

It's right to be laughed at. The most urgent thing is to build a TV, otherwise no one will care about the so-called ecological model.

From Zero to One: The Battle between Innovation and Tradition

In order to achieve this goal, Liang Jun’s main task in the second half of 2012 was to build the hardware team from scratch.

Android set-top boxes are a training exercise. After half a year of preparation, Liang Jun finally launched the first Android-based smart set-top box T1 on July 24, four months earlier than the Xiaomi Box launched in November. In December, when the Xiaomi Box officially went on sale, LeTV launched a new generation product, LeTV Box C1, which was priced at the same price as the Xiaomi Box at 399 yuan, competing head-on with it.

This at least proves that LeEco's hardware team is no worse than Xiaomi's. Not only that, this early start also made Liang Jun realize a truth: when the opportunity comes, whoever is the first to act may win; being late may mean being late forever.

However, when he really started to get involved in television, Liang Jun found that it was too difficult for the set-top box team to work on television. The bigger difficulty was that Liang Jun could no longer recruit reliable talents in the television industry.

On the one hand, no one believed that LeTV would be successful in making televisions. On the other hand, many people in the television industry did not have the “fighting spirit” that Liang Jun wanted. They were used to a comfortable life and would not come. Of course, in that environment, finding someone who understood Android from the television industry was even more wishful thinking.

Liang Jun had to look for people in the mobile phone industry. "The VP for the underlying BSP arrived in August, and the VP for UI arrived in November. They were all poached from the mobile phone industry and trained to work on TVs. But according to the schedule at the time, the product had to be launched in May of the following year, which was too much pressure."

Liang Jun was very anxious, almost to the point of madness. He worked overtime with this group of people every day, wondering if he could get closer to the goal he had set.

But it turns out that diligence doesn't always make up for lack of talent.

"At the beginning we said that if we wanted to compete with Apple, we had to make aluminum frames and acrylic panels like Apple, and make them look very beautiful," Liang Jun said. But in January 2013, LeTV and Foxconn discovered that this was actually impossible to do in the TV industry.

After many nights of hard work, Liang Jun's mind began to go a little crazy. Liang Jun thought, if the mobile phone can do it, then use the CNC (CNC machine tool) method of the mobile phone - use a drill to cut automatically in a large closed room, and each machine carves out a frame like a sculpture.

But there is no CNC machine that big. Liang Jun thought, why not try laser?

The task fell back on Foxconn. Foxconn then launched a global tender for this giant laser device; embarrassingly, only one company responded to the bid, and it did not commit, just trying it out first. Fortunately, this bet did not fail: Liang Jun and his partners developed a laser device as big as a large house, and the first X60 was cut out.

After realizing the team's shortcomings, Liang Jun went back to find some people from the TV industry to take charge of picture quality, power boards, etc. In his opinion, although R&D personnel from the TV industry still account for less than 20% of the R&D team, most of the people in structural departments such as display are from the TV industry.

This is a reflection of decades of technology accumulation in the television industry, and it is impossible for LeTV to subvert everything.

Getting ahead of Xiaomi: The killer feature of cost-effectiveness

On May 7, 2013, LeTV's first-generation TV X60 was officially released.

Although LeEco's PPT was full of "ecosystem" words, consumers didn't care at all. What really stimulated consumers was the unprecedented cost-effectiveness of the X60: a 60-inch large screen + a quad-core processor, priced at 6,999 yuan + 490 yuan (490 yuan is the video membership service fee).

At that time, products of the same size were basically priced over 10,000 yuan; as for products with the same configuration, there was almost no object for comparison.

The market responded positively immediately. According to official data released by LeTV, the first 10,000 X60s were sold out in less than an hour. In the end, X60 sold more than 300,000 units during its life cycle, which is quite impressive for a 60-inch large size. An example that can be used to prove this is that as a partner, Foxconn only expected 50,000 units for this product.

"Before the sale started, Foxconn held a ceremony. They wrote on a small blackboard how much price Foxconn would reduce if 100,000 units were sold, and how much price would be reduced if another 100,000 units were sold. After that, Terry Gou signed with us one by one," Liang Jun said. In fact, Foxconn had no intention of using the latter steps.

Since then, cost-effectiveness has become an important label that LeTV TV cannot erase. On October 10, LeTV released the 50-inch TV S50. 50 inches is more mainstream, and the price of 2499+490 is also lower. Combined with LeTV's familiar Internet company-style marketing, S50 has become the biggest hit among the first generation of TVs.

But what is unexpected is that behind this series of popularity, there is still a LeTV-style gamble.

In fact, although the X60 was released on May 7, LeTV TV was not actually available for sale until July 3. Liang Jun told Tencent Technology that the two months from the release to the launch were claimed to be marketing, but in fact the research and development was not completed.

Jia Yueting couldn't wait any longer. From September 2012 to May 2013, LeEco was questioned too much. The only way for Jia Yueting to prove to the outside world that he was not exaggerating was to launch the TV as scheduled. This was indeed the case. After launching the TV on May 7, LeEco's stock price rose by two daily limits. At the same time, public opinion was warming up. Although the media did not praise it, many neutral voices had emerged.

The other side of the gamble is the bugs that users keep reporting. "We were the first to try out smart TVs, and there were so many small problems, such as incompatible set-top boxes, slow response after connecting to the Xbox, and various display problems," Liang Jun said. It was not until the end of September that year that the company was able to "just clean up the mess" after spending two hours a day on user feedback meetings.

Also in September, Xiaomi TV was finally launched. By then, LeTV had already taken the lead for a long time; just like smart set-top boxes, a few months, seemingly short, can be a matter of life and death for Internet companies.

However, relying on the brand effect and supply chain advantages accumulated when making mobile phones, Xiaomi TV still made some noise at the beginning. At this time, LeTV itself failed to make progress, and its hardware "weakness" was exposed.

When people opened the back cover of LeTV TV, they were surprised by the spider-web-like wiring. Many competitors took the opportunity to attack, and the poor workmanship discouraged some consumers, and LeTV TV was once in a passive position.

So, starting in November, LeEco had to start working on solving this problem. "We thought about using black tape to make it look prettier, but the wires were still the same; there was no other way, the architecture was already like this, it was wrong and we tried our best to remedy it, this was a painful lesson," Liang Jun said.

At this time, many people began to speculate whether the surging Xiaomi TV would replace LeTV.

Traditional manufacturers enter the market and form alliances with Internet companies

But "luck" did not betray LeTV TV, which had just emerged from the PPT.

2013 was the year when the era of video copyrights took a hidden turn. After several years of development, the piracy model gradually disappeared, and buying copyrights became the new keyword. Overnight, LeTV's stockpiled genuine copyrights became a significant asset.

Reflected on the TV screen, the large number of high-definition genuine resources on LeTV TV is in sharp contrast to Xiaomi, which does not have its own copyright and users can only solve the problem through piracy.

Users attracted by the cost-effectiveness have also gradually discovered this. Not only that, compared with traditional TV manufacturers, LeTV TV also has obvious advantages in high-definition resources, and the experience advantage of Internet companies in operating systems has once again helped LeTV attract many fans.

Of course, the most important thing is the content.

The market immediately followed suit. An obvious change is that after LeTV, more and more TV manufacturers began to notice the trend of smart TVs, and Internet manufacturers also found that this business was profitable. For the first time, the hardware industry and the content industry were truly on an equal footing and began to plan a marriage.

Starting from 2014, traditional TV manufacturers such as TCL and Changhong began to announce cooperation with video websites such as iQiyi and Youku to launch smart TVs.

However, video websites do not have real system-level permissions on these TVs, and most of them are just customized apps. The power of life and death of the entire TV operating system is still in the hands of those in the traditional TV industry.

For traditional TV manufacturers, whether it is exclusive cooperation with video websites or video aggregation mode, there are integration problems. How to open up the membership system? Whose users are they? Who will ensure the integrity of the user experience?

LeTV Video and LeTV TV are both under LeTV, so this is not a problem. However, for TV manufacturers and Internet companies seeking to transform into the Internet, their genes, goals and interests are different, so the so-called joint development is just a stopgap measure.

In 2014, LeTV TV successfully sold over 1.5 million units. Although there was a huge gap compared to Hisense, TCL and Skyworth, whose sales were in the tens of millions, LeTV's momentum had made the latter anxious. Xiaomi TV, which lacked content, only sold 300,000 units and fell into silence.

Multi-party melee: Why didn’t the opponents find LeTV’s Achilles’ heel?

By 2015, driven by LeTV TV, the potential of the Internet TV market became apparent, and capital that saw opportunities and value poured in.

Xiaomi was the first to return to the battlefield. At the end of 2014, former Sina editor-in-chief Chen Tong joined Xiaomi. Under Lei Jun's instruction, Chen Tong, with $1 billion in content-specific capital, led the Xiaomi team to catch up. By June 2015, he used the capital to build a content alliance consisting of major industry companies such as iQiyi, Youku Tudou, and Huace.

After that, PPTV, Baofeng and other Internet video websites also followed LeTV and entered the market with capital. For a time, the TV field, which originally had only a few players, became a melee among dozens of players.

At this time, in the eyes of many people, the cost-effectiveness, marketing, content, etc., which were once considered to be the killer advantages of LeTV TV, no longer seem to be obvious.

But surprisingly, by December 2015, LeTV announced that its sales volume had doubled to 3 million units. For comparison, Xiaomi sold about 1 million units that year, and Coocaa, an Internet brand owned by Skyworth, sold only 1 million units. Other Internet TV brands sold less than 1 million units.

In the field of Internet TV, LeTV TV's advantages are further expanding.

Liang Jun told Tencent Technology that he was very nervous that year, "but I felt relieved when the products of various companies came out. They still used the same old methods and had no operations."

In Liang Jun's logic, content + hardware is just the first step. After producing a hardware with rich content and excellent experience, more and more users will be accumulated. In this process, many competitors learned pricing and marketing from LeTV, but they only learned the basics. Cost performance is important, but users are willing to pay for a good product. More importantly, a strong Internet operation team is indispensable to keep these users and make them start paying.

Whether it is video content, or LeTV's TV games and TV shopping teams, they are all doing user operations. This is difficult, and whoever succeeds will generate energy that Liang Jun fears.

But LeTV TV's competitors made Liang Jun feel relieved.

It is still Xiaomi TV. Although it has established a content alliance and initially made up for the content gap, it is difficult to solve the problem of who the users belong to before operating. Xiaomi TV is slow to act on the TV membership that users have been calling for. In order to take care of various partners, most high-definition paid content can only be paid for a single point, and some resources even need to jump to the partner's page.

This is far from the experience of watching all platforms with one membership on LeTV TV.

In addition, some analysts believe that from the perspective of all aspects of TV hardware products, Xiaomi TV is better than LeTV. However, in addition to its weakness in content integration, Xiaomi used to be superstitious about its successful experience with mobile phones, hoping to spread the word of mouth about its products, unlike LeTV TV, which spent a lot of money on advertising space on multiple TV programs and missed the best opportunity to build its brand.

As for PPTV, Baofeng, etc., the content shortcomings themselves have not been resolved. Moreover, an industry insider once told Tencent Technology that due to the lack of supply chain experience, many Internet manufacturers are at a great disadvantage in terms of suppliers.

"Take panels as an example. Panel manufacturers are generally very snobbish. They will give priority to those with larger volumes. Small players often can't even get panels." This has opened up a big gap with LeEco and Xiaomi, which have been deeply involved in the supply chain for many years.

Competitors still haven't found the real weakness of LeTV TV: whether it is cost-effectiveness, content, hardware, or operation, if only one of them is taken, it will be impossible to win; but if one of them is missing, it will be difficult to succeed.

At this point, if we want to summarize the reasons why LeTV TV temporarily wins, it is nothing more than the following points:

First, the vertical integration of content + hardware ensures the unity and integrity of the user membership system, the rapid iteration of products, and a good user experience; second, the cost-effectiveness advantage is guaranteed from the business model. In terms of channels, the online mall and offline Lepar direct stores have greatly reduced the traditional channel agency costs, and the content payment income model of film and television and sports members has further compensated for the hardware costs, which has a pricing advantage compared to other TV manufacturers; third, a new Internet TV brand image is shaped through advertising bombardment.

For other TV players, none of them have achieved the above three points at the same time, but this set of gameplay has been running on LeTV TV for two years. In the rapidly changing technology field, two years is by no means a short time, it is enough for a company that has not made any major mistakes to build barriers.

But LeTV TV is far from being able to sit back and relax.

The State Administration of Radio, Film and Television's regulatory policies on television content have become stricter, which once poured cold water on Internet TV manufacturers. The cooperation between LeTV and the license holder of the broadcast control platform of the State Administration of Radio, Film and Television was once deadlocked. It has been a long way of walking on thin ice. After many twists and turns, it finally reached a cooperation with China Media Group Oriental CIBN this year.

From the industry perspective, Liang Jun is most worried about Alibaba and Whale. In his opinion, Alibaba has Internet genes, including Youku, as well as funds and users. "This giant has almost everything that LeTV lacks. It has everything. The only thing it lacks is that we started earlier than it." As for Whale, Liang Jun is worried that they will use the power of capital to raise hundreds of millions of yuan and completely integrate content and hardware, which may touch the nerves of LeTV TV.

Liang Jun made no secret of the fact that LeTV TV was short of money. From content to hardware to user operations, LeTV TV hit the right rhythm at every step; but the lack of funds always made the final output a little bit short of the ideal result.

In Liang Jun's eyes, these imaginary enemies are all "tycoons" who already have or may have a lot of money. Once the idea is right and they are willing to spend money, many problems may be solved easily in today's increasingly developed TV OEM industry.

Sacrificing scale for profitability and introducing competitor content

But in any case, at least for now, LeTV TV has no strong challengers in the field of Internet TV.

However, even if Liang Jun sells the 10 millionth Internet TV set by the end of December this year, LeTV TV's size in the entire TV industry will still be far behind that of traditional giants. When the entire industry no longer has a significant growth, if LeTV wants to continue to move forward, it will inevitably have to snatch the cake from traditional TV giants.

If this continues, the difficulty will increase and the tension will naturally become stronger.

What worries Liang Jun even more is that during the LeTV financial crisis in November this year, LeTV TV was spared from being affected due to its relatively healthy cash flow. However, according to Jia Yueting's promise, LeTV TV will be the first profit target of the LeTV system next year.

This undoubtedly disrupted Liang Jun's plan. Previously, relying on "ecological subsidies", LeTV TV had been selling hardware at a loss. Although LeTV.com was profitable as a whole after being consolidated into a listed company, as a single business, LeTV TV's parent company LeTV Zhixin suffered losses for many years.

The financial statements that had been neglected will once again occupy Liang Jun’s desk. “I originally planned to increase the sales volume and make a profit a year later, but now it seems that I can’t wait that long.”

Liang Jun told Tencent Technology that LeTV TV has always been on the edge of profitability, and it is not too difficult to achieve profitability next year. The current solutions include the following points:

1. The focus of products is on TVs above 50 inches, which will limit the supply of small TVs such as 40/43 inches to a certain extent. Although sales growth may slow down as a result, the proportion of mid- to high-end users can be increased;

2. Continue to develop advertising business. Currently, LeTV TV's annual advertising revenue is about 300 million, accounting for 60% to 70% of the industry. Compared with its peers who only have in-APP advertising, LeTV TV's advertising sources also include startup ads, desktop ads, carousel ads, etc.;

3. Develop TV shopping. Through its own channels, it selects e-commerce companies to enter the market. It is expected that the revenue will be 500-600 million next year and 1.3 billion the year after;

4. Increase membership renewal income. Liang Jun admitted that LeTV's large-scale purchase of hardware and free membership this year was a bit excessive, but he plans to use some newer ways to revitalize the membership system, such as changing the price policy, adding ancillary services, and even possibly recovering member time in a certain way.

In addition, in December this year, Liang Jun also plans to announce an open strategy to introduce more LeTV Video competitors to the LeTV TV platform.

"Maybe LeTV Video is a little sensitive about this, but we have to do it," he said. This is also something that Jia Yueting agreed to. LeTV TV must try some new changes.

Liang Jun has to get busy again. The question is, will competitors buy into it?

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.