Chinese consumer electronics upstart LeEco is scheduled to start selling its TVs and phones in the U.S. this week. These devices directly compete with products from Korean consumer electronics giant Samsung, which LeEco has been heavily poaching from to build out its U.S. team.
But at its core, LeEco doesn’t want to be another Samsung. Instead, the company is looking to be more like Amazon, with plans to launch a paid subscription service that mimics Prime for all but two-day shipping.
LeEco’s big U.S. launch event in San Francisco earlier this month felt in many ways like a Samsung gig. The event was MCed by Danny Bowman, who used to be chief sales and operations officer at Samsung before LeEco hired him away to become its North American chief revenue officer. Samsung’s former HR boss, Shawn Williams, who is now chief administrative officer at LeEco US, could be seen huddling with high-profile guests.
Then there were the obvious swipes at Samsung, including a video that had a pretend mobile carrier store clerk praise a phone with the words “trust me, these phones are blowing up.” There was also a cameo appearance by none other than Michael Bay, who once famously walked off stage during a Samsung press conference over a malfunctioning teleprompter. And finally, there was that odd mixture of borderline-bizarre gestures of grandeur that Samsung is also known for, and that never quite seem to translate.
But take a look beyond the marketing, and you’ll find a company that wants to be anything but Samsung. Where Samsung has tried to compete with Apple on the high-end with premium-priced phones, LeEco is going for the budget market. The company’s flagship Le Pro3 phone is priced at $399, but will go on sale for $299 as part of a limited-time market introduction this Wednesday. Its cheaper sibling, the Le S3, regularly costs $249, but goes on sale Wednesday for $149.
These rock-bottom prices are partially to introduce LeEco to a U.S. audience, but the company has been embracing razor-thin margins in China ever since it started to sell hardware. That’s because LeEco doesn’t just view itself as a hardware company, but as a company that’s deeply rooted in services.
LeEco got its start as a video streaming service in China all the way back in 2004, and has since expanded to offer all kinds of services, including music streaming, cloud storage and more. U.S. consumers will get a first glimpse at this model as part of a subscription service called EcoPass. Anyone who buys one of the company’s new phone gets three free months of EcoPass, consumers who buy a LeEco TV even get a whole year for free.
There’s no word yet on how much the service is going to cost after that time, and the value proposition is still a bit fuzzy as well. At launch, EcoPass offers users the option to unlock free premium content from partners like Sling TV, Machinima, Seeso and Tastemade, as well as 5 GB of cloud storage, an extended warranty and preferred access to future sales — nothing of which exactly cries must-have.
But even this first iteration shows that the company has big plans for its subscription service. Users are encouraged to register for EcoPass as soon as they set up their new LeEco phone. Premium content channels are prominently integrated into LeEco’s video apps, and there are even hints at plans for premium live content.
All of this bears some resemblance to Amazon Prime. Sure, LeEco doesn’t have free shipping, which is still the key benefit for most Prime members. But for Amazon, Prime is also about establishing a continuous commercial relationship with customers with a base value proposition — free packages to your door — and the opportunity to upsell you on all kinds of additional services, be it grocery deliveries, cloud storage, music streaming or paid video services like Starz and HBO Now.
LeEco wants to take the same model, but replace free shipping with affordable consumer electronics paired with media and cloud services. The company then plans to upsell consumers, and just like Amazon resell video subscription services from its content partners.
This would be a tough proposition for anyone entering a new market, even with bargain-priced phones and TVs. But LeEco has an ace up its sleeve: The company acquired TV maker Vizio for $2 billion earlier this year. Vizio is one of the top-selling TV brands in the U.S., and LeEco will be able to target millions of existing Vizio TV owners with its EcoPass subscription service, plus offer free test periods to anyone who is buying a Vizio TV in the future.
When LeEco starts to sell its own hardware in the U.S. this week, it’s adding to that addressable audience. But the real test for the company will be signing up content owners to deliver a service that sets it apart from a hardware-focused company like Samsung.