Jia Yueting, the colorful boss of Chinese entertainment and technology group Le Eco, has voluntarily cut his salary to $0.15 (RMB1) a month as a symbol of his efforts to improve the company’s sinking finances.
In a letter circulated to his staff on Monday, Jia admitted that Le Eco is suffering from a major cash crunch. “Our funding and resources are extremely limited. Our early stage funding of Leshi Auto has been enormous with continuous spending of RMB10 billion ($1.5 billion),” he said in the letter. In recent years, Le Eco, which owns the LeVision Pictures film production and distribution company, has diversified from a core business of video streaming into technology, e-commerce, sports rights, and electric cars.
Describing the experience as “ice and fire,” Jia acknowledged that he had pursued growth over financial rectitude. “We blindly sped ahead, and our cash demand ballooned. We got over-extended in our global strategy. At the same time, our capital and resources were in fact limited,” he said in the letter.
Jia did not disclose in the letter any areas of spending cutbacks, nor specify plans to raise new financing.
The Le Eco moniker is illustrative of the ecosystem concept that the group has pursued. Le Eco places entertainment and media technology, including phones and smart TVs, at the center of its universe, though it has not always been clear whether the hardware or the software is the loss leader. The business plan sees revenues coming from a mix of member subscriptions, advertising, and paid content.
As one of China’s most successful film distributors, LeVision Pictures has expanded into production and finance and is hoping to finish the year with record results.
In November 2015, it signed a deal to acquire Lionsgate’s fantasy action film “Gods of Egypt” (which became a huge flop), and with Hollywood partners unveiled a ten-title production and distribution slate.
LeVision Pictures is now one of the key financiers of Legendary Entertainment’s upcoming fantasy-action film “The Great Wall,” with Matt Damon and Andy Lau. With a reported production budget of around $150 million, it is one of the most expensive U.S.-Chinese co-productions to date. The film’s director, Zhang Yimou, serves as an artistic consultant to LeVision Pictures.
Parts of Le Eco are privately held. But Jia’s group also includes two public companies: Leshi Information and Technology (listed on the Shenzhen exchange in China) and mobile phone manufacturer Coolpad (listed in Hong Kong.) Leshi shares finished Tuesday trading with a 3% gain at RMB38.99, while Coolpad shares closed at HK$1.07, close to its 12-month low.
In June of this year, the group spent $2 billion to acquire U.S. TV set manufacturer Vizio. It has also invested heavily in sports rights, for the separately financed LeSports division.
Earlier, in April, LeSports said that it had raised $1.2 billion (RMB8 billion) in a series-B funding round, from institutional investors and celebrities including Sun Honglei and Chen Kun. It said that valued the company at $3.21 billion (RMB21.5 billion).
The group plans to open a car making plant in China’s Zhejiang province next year, and another in the U.S.’s Silicon Valley. It launched a prototype of its first electric car in April this year and has deals with Aston Martin.
(Disclaimer: LeEco is the principal financier of Faraday Future, a powertrain supplier to the Dragon Racing team that is owned by Jay Penske, head of Variety’s parent company Penske Media Corporation.)