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LeEco wants to be the next Amazon in the US. Genius or bust?

Is this Chinese company, promising high-quality products at super-low prices, a flash in the pan? LeEco says it's here to stay.

Roger Cheng Former Executive Editor / Head of News
Roger Cheng (he/him/his) was the executive editor in charge of CNET News, managing everything from daily breaking news to in-depth investigative packages. Prior to this, he was on the telecommunications beat and wrote for Dow Jones Newswires and The Wall Street Journal for nearly a decade and got his start writing and laying out pages at a local paper in Southern California. He's a devoted Trojan alum and thinks sleep is the perfect -- if unattainable -- hobby for a parent.
Expertise Mobile, 5G, Big Tech, Social Media Credentials
  • SABEW Best in Business 2011 Award for Breaking News Coverage, Eddie Award in 2020 for 5G coverage, runner-up National Arts & Entertainment Journalism Award for culture analysis.
Roger Cheng
4 min read
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LeEco's prototype self-driving car apparently had trouble getting to the US.

CNET

You've probably never heard of LeEco. But the Chinese company, an unconventional mashup of Apple, Amazon, Paramount, Tesla and Netflix to millions of consumers in China, has plans, big plans, to dominate your home.

That's why it hosted a splashy coming-out party in the US last month at which it unveiled phones, TVs, a smart bike and even a trailer for Matt Damon's "The Great Wall," which the entertainment and devices company co-produced. What makes things especially interesting: LeEco plans to offer premium products at ultracompetitive (as in, wow, that's a deal) prices to lure subscribers to its content and services.

Then things got a little weird.

Following a video that put WWE entrances to shame, CEO Yueting Jia ran on stage and spent 20 minutes offering up a confusing monologue about the prototype for LeEco's self-driving car . Jia rambled on about how one of the cars couldn't be shown because it was damaged in transport, while another was stuck in London with director Michael Bay, who is using the vehicle in his next "Transformers" film. To an increasingly quiet and confused audience, he went into excruciating detail about the whole affair.

Turns out Jia isn't familiar with the concept of too much information.

While many laughed at the odd scene, the oversharing led to a more serious matter this week. Jia put out a six-page memo to employees warning that the company had expanded too fast. He called for an organizational restructuring to eliminate "big-company disease."

So much for that coming-out party.

Watch this: LeEco makes US debut with two luxe, low-cost phones

The takeaway for many: LeEco is burning cash on its improbable quest to become everything to everyone. For all of us, that raises fears you might buy products from a company that won't be around long in the US.

LeEco says that's just not the case. "Here in the US, we're going to actually add resources," Danny Bowman, chief revenue officer of LeEco, said in an interview Wednesday.

Bowman chalked up the memo to a cultural tendency and expectation in China for executives of successful companies to publicly reflect and criticize the strengths and weaknesses of their businesses.

But Jia had a point. The company has made some eyebrow-raising investments in the US. It bought TV maker Vizio for $2 billion and purchased Yahoo's 50-acre development site in Santa Clara, California, to build a campus to house 12,000 employees.

Bowman doesn't see it as overexpansion, but as an affirmation of LeEco's commitment to being in the US. "This is about creating a second world headquarters," he said. "It's not just having an operating entity in a different part of the world."

Sticker shock

LeEco is far from being a household name in the US. The reason people are paying attention is that the company's offering premium products at ultracompetitive prices. Its 85-inch high-definition television costs $4,000 after a $1,000 instant rebate (rival products could sell for twice as much). It sold out in seconds during a limited-time "flash sale" last week.

The LePro 3 phone costs $300 after a $100 rebate and sold out in four hours (it took three hours to sell out in its second flash sale yesterday). Comparable high-end phones like Apple 's iPhone 7 start at $650.

There's a reason its products are cheap. In China, LeEco was able to create a successful business with content at the core, analysts note. It became popular as an online video portal before it began producing movies and shows and then making devices like TVs and phones. Chinese consumers buy the products at a discount and then subscribe to the services that run on those devices.

Watch this: LeEco goes big in the US with 85-inch TV for $5,000

The company is doing the opposite in the US, seeding the market with devices first. Then it plans to get people sign up for its EcoPass subscription service that gives users access to discounted media and services. It's still working on more content deals.

The problem is that might not be the best way to build a name here, especially considering "breaking into the US market is very hard for a new brand," said Carolina Milanesi, an analyst at Creative Strategies.

LePro users get three months of EcoPass for free, while uMax 85 TV owners get a full year for free. Bowman said after the three-month trial, LeEco will roll out pricing to customers who want to stay on the subscription. The company hasn't said what it will cost.

That subscription will be key to LeEco's longevity in the US. When asked whether LeEco loses money on its products, Bowman would only say it looks at the "lifetime value," which includes an assumption you'll eventually pay for a subscription service. If you just buy the phone or TV, LeEco takes a loss.

LeEco's Le Pro3 and Le S3 take on Google Pixel, OnePlus 3

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The best way to think about EcoPass is to compare it to Amazon , whose cheap products, like the $49 Fire tablet, get people into the world of its $99 a year Prime subscription service.

Bowman compares LeEco to Costco, where customers pay an annual membership fee to get access to discounted products.

Rob Chandhok, who's in charge of R&D for LeEco's North America business, said the company will have to expand the perks and services available to convince EcoPass members to keep paying for those things past the free trial.

For now, LeEco is only selling its products through its LeMall website. Bowman acknowledged that LeEco eventually will have to sell its products through retailers and wireless carriers if it really wants to win a mass audience. He said the company is already talking with all of those parties, though he didn't name any names.

For now, the only impression LeEco has made on those of us in the US who've heard about the brand is that initial press conference and the strange way its CEO capped off the event.

Bowman compared his deep dive into the saga of the driverless car to the memo. Chandhok sees Jia's unconventional welcome speech slightly differently.

"We all have our quirks," Chandhok said. "His quirk is passion."