Losing money to gain publicity? The business logic behind LeTV's motherboard upgrade for 570,000 users

"For the past three years, LeTV has always had a problem. Today we must take practical actions to make up for the mistakes we have made." Liang Jun, president of LeTV Zhixin, said this at LeTV's "Soft Power and Large-Screen Influence" summit.

The problem he was referring to was that the first generation of Super TV launched in 2013 could no longer allow users to enjoy the latest and richest large-screen ecological services due to performance reasons; and LeTV's way of compensating for this was that first generation Super TV users only had to purchase a one-year Super Movie and TV membership worth RMB 490 from the LeTV Mall, and they could replace the Mstar 6A801 chip used in the first generation Super TV S40/S50 with the Mstar 6A928 for free.

This move made LeTV the first smart TV company in the color TV industry to replace the motherboard. As soon as the news came out, some people immediately pointed out that LeTV seemed to be losing money to gain publicity, but in fact it was a marketing trick.

But is this really the case? How can LeEco be so confident in being the first to try something new?

Do you really think LeTV is selling sentiment at a loss?

According to statistics from LeTV, the motherboard replacement covers 570,000 first-generation super TVs. If all users involved enjoy this service, it will be a considerable expense for LeTV. It should be noted that LeTV's motherboard replacement is not completely free this time. The prerequisite for the replacement is that users must purchase a one-year super video membership worth 490 yuan. Some people think this is a disguised way of charging users.

Liang Jun did some calculations for everyone. "Regarding the cost issue, I can clearly say that it costs us much more than 490 yuan to replace a motherboard. It is more difficult to make a motherboard for an old machine than to develop a new one. Moreover, the motherboard that LeTV replaced was a high-end motherboard with 3G memory. Add in the round-trip visit fee and cleaning fee, and it is actually a loss."

The deal seems to be a loss-making one, but Liang Jun knows very well in his mind that "it is better for us to spend money on users than on advertising. This is a user-centric concept." LeTV has its own business logic behind the replacement of the motherboard.

After replacing the motherboard, the hardware performance of the 1st generation super TV will be doubled, the original dual-core CPU will be upgraded to a 4-core CPU; the original 1G memory will be upgraded to 3G memory; the latest 4th generation image quality processing engine will be adopted, etc. In terms of software, the old TV will have a faster, smoother and more fluid control experience, the system will be updated to the latest EUI5.8 Springer, and segmented multi-desktop will be realized. 9-way HD hard decoding supports LIVE super live wall, synchronous theater, Lejian, sports, games, children, shopping, music and other diverse content as the desktop, and supports viewpoint radar, multi-angle, multi-commentary, watch and buy, bullet screen and other services.

As we all know, the business model followed by LeTV in entering the TV industry is not the inherent routine of the traditional TV industry, but the user operation model. By replacing the chip, LeTV TV has extended its service life on the surface, but in fact it has also completed the expansion of more functions of the super TV and extended the usage scenarios, allowing more users to enjoy video, game, e-commerce and other services, opening up new usage scenarios in the stock market, thereby promoting the development of the entire line of business.

Ren Guanjun, vice president of marketing and communications at LeEco Zhixin, explained, "The logic behind LeEco's chip replacement is not to replace it for the sake of replacement. No company wants to lose money in vain. After we lose money to replace it for users, it just proves that LeEco provides users with continuous value. Why do a large number of advertisers choose LeEco? The replacement of the motherboard is positively correlated with the soft power of the large screen. It is precisely because of the strong enough performance that it can support better UI, better content, better experience and better commercial value in the future."

Different business logics determine how far a company can go

Currently on the market, some Internet TV brands have launched TVs priced no more than 1,000 yuan. Due to cost constraints, they can only choose to squeeze the hardware performance of the TV. This will inevitably affect the control, gaming, shopping and other experiences on smart TVs, and in the long run it will not be conducive to the manufacturer's subsequent operations of other businesses.

A traditional home appliance manufacturer once said that although we have sold a lot of TVs, we have not really gained more users, and the users have been lost after the color TVs are sold. "A considerable number of TVs sold by traditional TV manufacturers are non-smart. Although each company has about 15 million smart TVs, about 60% of these 15 million are not operational. Therefore, the real activity of these 15 million TVs, their ability to connect to the Internet, and the ability to spread and influence users behind them are still far from LeTV's 7 million." Liang Jun said.

Relevant data shows that as of June 30, 2016, the cumulative sales of Super TVs in the three years since they were launched were about 7 million units, and the cumulative sales in the second half of this year will soon exceed 10 million units. After LeEco announced the acquisition of Vizio, the LeEco large-screen ecosystem platform will have more than 28 million smart TV entrances, with a cumulative playback time of more than 11 billion hours and up to 730 million monthly active users. Large-screen advertising, content renewal value, segmented operations, shopping, games, etc. are all important units of large-screen commercialization.

"Differences in business logic determine how far a company can go. What is important for Internet TV is the service capabilities and content value behind it," Ren Guanjun believes.

LeTV’s current goal is to ensure that each Super TV can operate efficiently throughout its entire life cycle of 5-7 years and meet user experience needs.

In addition, according to Liang Jun, LeTV is also planning a bigger game, which is to make the TV "grow legs" so that users can have a brand new experience. It is speculated that in the future LeTV may have more integration with mobile terminals and TV to achieve true multi-screen interconnection and interaction.

For LeTV, changing chips is definitely not as simple as losing money to gain publicity, or we can think of it this way, LeTV is spending little money to achieve big things.

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.