Chinese video streaming company LeEco (樂視) is breaking into the US TV market by buying Vizio Inc, a manufacturer of budget-priced sets.
The US$2 billion purchase announced on Tuesday marks another ambitious foray by LeEco. The company’s chairman and CEO, billionaire Jia Yueting (賈躍亭), is also behind Faraday Future, an electric car company building a massive plant near Las Vegas.
At an event in Los Angeles, Jia promised “disruptive pricing” reminiscent of how it bundles video subscriptions with smartphone and smart TV purchases in China.
Photo: AP / Jeff Lewis / LeEco
He also said the company would launch its US presence in a few months with an event in Silicon Valley, where it has opened its US headquarters in San Jose.
Vizio is based in Irvine, California, and has been the No. 2 TV brand in North America behind Samsung Electronics Inc for the past seven years, according to research firm IHS Markit.
Vizio will continue to operate as an independent subsidiary, and its brand will remain.
Vizio founder and CEO William Wang (王蔚) will leave to run a spun-off data company called Inscape.
The deal, which is to close by year’s end, will help Vizio expand to markets beyond the US, Canada and Mexico.
With about 24 million Internet-connected TVs combined, including about 8 million LeEco has sold in China, LeEco gains a larger audience for movies and TV shows that it produces or licenses.
It is sometimes called the “Netflix of China,” although it plans to allow US customers to access Netflix Inc on its smart TVs.
Winston Cheng (鄭孝明), LeEco’s global head of corporate finance and development, said in an interview that the company will need to expand its content offering to appeal to non-Chinese customers.
IHS Markit analyst Paul Gagnon says he is not convinced the strategy of linking LeEco’s content to its hardware will work as well in the US as it has in China, where LeEco claims to be the No. 1 TV brand.
“One of the reasons LeEco is so successful in China is there isn’t so much competition in terms of companies doing a good job selling movies and TV shows,” Gagnon said. “In the US we have companies like Netflix and Hulu and ESPN and HBO. There’s already built-in competition. It’s not going to be easy.”
Jia owns half of LeEco. One of its businesses, LeVision Pictures Ltd (樂視影業), is cofinancing The Great Wall, a blockbuster starring Matt Damon. After the theatrical run, the movie will likely be offered for free streaming to LeEco and Vizio TV owners, but this is just one piece of a larger strategy to marry video subscriptions and hardware, Cheng said.
LeEco is planning an initial public offering in the US within four years to raise money for content and research and development, he said.
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