The ‘Netflix of China’ is coming to the US, and it could be huge

China's LeEco is headed to the US this fall to take on Silicon Valley's heavyweights

LeEco's new headquarters in San Jose.
LeEco's new headquarters in San Jose.

Chances are you’ve never heard of LeEco. But that’s likely to change this fall when the Chinese conglomerate — often called the Netflix of China — launches in the US. And if the breadth of services and devices the company offers in its homeland is any indication, LeEco could prove to be a worthy challenger to Silicon Valley heavyweights ranging from Apple to Tesla.

LeEco, formerly known as LeTV, began as a streaming media service in 2004. That’s a full three years before Netflix was streaming content here in the US. Since then, LeEco has expanded well beyond streaming video to markets as diverse as smartphones and self-driving cars.

The company, which has a market cap of $14 billion, has three content verticals: content, sports and portfolio business. Each has its own subsections. Content, for example, includes Le Vision Pictures, LeEco’s own production studio, and LeTV.com, its video streaming service.

The sports vertical, meanwhile, oversees LeEco’s Le Sports, which offers viewers sports content ranging from the NFL and MLB to the NCAA’s Pac-12 and the English Premier League. The portfolio business is made up of the music video streaming Le Music service and LeEco’s technology incubator program.

LeEco's newest smartphones
LeEco's newest smartphones

But LeEco doesn’t just offer content to consumers; it controls the gateways to it, too. It currently offers a family of high-end, Android-powered smartphones, smart TVs and streaming devices in China and debuted its all-electric, self-driving concept, the LeSEE, at the Beijing Auto Show in April.

LeEco doesn’t make much money from phones or TVs, though. Instead, it makes its cash on the streaming services you watch on its devices. In fact, the LeSEE concept is designed specifically to drive itself so you can sit back and stream videos.(Interestingly, LeEco is also a major backer of the insane Faraday Future electric supercar.) And that’s exactly how the company plans to tackle the US market.

LeEco has already put down roots in Silicon Valley with a San Jose headquarters that houses 500 employees. And earlier this month the company bought a 50-acre site from Yahoo in Santa Clara, the Silicon Valley Business Journal reports.

This fall the company is expected to launch a line of premium Android-powered smartphones in the US. From there, it could roll out its own streaming service. A LeEco spokesperson, though, said the company could also choose to work with the likes of Netflix to ensure it can draw existing Netflix users.

Of course, LeEco faces obvious risks in the US market. Apple and Samsung already dominate the smartphone market with their own devices, which could make it difficult for LeEco to make a foothold for itself. Still, that hasn't stopped LeEco founder and CEO Jia Yueting from calling Apple "outdated," During a meeting of the Chinese Entrepreneur Club.

Yueting, according to CNBC, claimed his company is better prepared for the future, as it sees itself as an internet first company followed by software and hardware. Apple, Yueting said, focuses on hardware and software, which he claims is an obsolete business model.

LeEco's LeSEE all-electric, self-driving concept car.
LeEco's LeSEE all-electric, self-driving concept car.

Netflix, however, is a different story. Not only is the company’s name ubiquitous with video streaming in the US, its market cap is nearly three times that of all of LeEco.

"LeEco has been very successful in China because it is able to sell hardware at cost but be profitable [through] video service subscriptions," explained CK Lu an analyst with the market research firm Gartner.

"However, the US is a difficult market for any entrants from China. Carriers have a lot of controls on the mobile phone market. In the US, LeEco doesn’t have the advantage on the content to sell its hardware," Lu said.

"We think at this point, the launch in the US is more about driving attention from media and the capital market in the short term. But as LeEco is expanding its contents, it can serve Chinese speaking consumers in the global market and push its ecosystem outside of China."

LeEco also launched in India recently, so it's fair to say the company appears to be spreading itself rather thin for a company of its size. Will LeEco’s expansion into the US mark the birth of a new tech titan, will it simply provide a way for Chinese speakers in the US to catch up on Chinese movies and programming or will the company be a victim of its own ambitions?

We’ll find out come fall.

Email Daniel at dhowley@yahoo-inc.com; follow him on Twitter at @DanielHowley.

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