LeTV Joins Set-Top Box Wars 乐视网加入机顶盒大战
The latest “me-too” war is brewing on China’s vibrant but crowded Internet with word that online video specialist LeTV is rolling out a new set-top box product that will allow consumers to surf the Web on their TVs. This new product roll-out comes just a month after up-and-coming smartphone maker Xiaomi launched its own set-top box product, and not long after PC giant Lenovo (HKEx: 992) also entered this space that looks promising but has yet to find a major audience. (previous post)
This kind of “me-too” phenomenon has become all too common in China, with companies big and small all rushing into new areas that seem to have big growth potential. The nascent rush has in many ways been sparked by Apple (Nasdaq: AAPL), which rolled out its own Internet TV product earlier this year, even though it has yet to gain major traction. Apple previously revolutionized the smartphone and tablet PC industries with its iPhone and iPad, and now it appears that many of the Chinese companies are betting that Apple TV will also revolutionize the way people watch TV. Accordingly, no one wants to sit around and wait too long and risk missing out on the latest hot new product.
But in this instance, we could actually see a rare case where one or more of these me-too Chinese companies could succeed even if the Apple product ultimately fails to find an audience. That’s because the Chinese firms can take advantage of China’s rich and fast-growing library of online video content being offered by a wide range of well-funded players including specialists like Youku Tudou (NYSE: YOKU), Xunlei and LeTV, as well as most major Internet players like Baidu (Nasdaq: BIDU) and Tencent (HKEx: 700). By comparison, most western markets have a far less diverse field of online content providers, with the US a case in point with its dominance by Google’s (Nasdaq: GOOG) YouTube.
Before we go any further, let’s step back and take a look at the latest media reports, which say that LeTV will soon launch its set-top box that will be powered by Google’s popular Android operating system. (Chinese article) Perhaps not surprisingly, the new boxes will sell for 399 yuan, or about $65, exactly the same as what Xiaomi charges for its product launched in mid-November. LeTV officials are pointing out that their box is actually free, since the 399 yuan includes a free one-year subscription to LeTV’s existing online video service.
The LeTV official was also quick to point out his company has attained the necessary programming licenses, an indirect reference to the fact that Xiaomi’s set-top box was forced to halt its program delivery service shortly after its launch due to unspecified issues that some believed were related to licensing. (previous post)
I’ve already said that these set-top boxes could have strong potential for success in China due to the abundance of video content providers, so let’s look quickly at the relative strengths and weaknesses of the 3 players who have now joined the fray. LeTV seems to be the best positioned due to its experience as a video content provider. But that advantage could also be a handicap if it wants to add other content providers to its system, since such providers might be reluctant to work with a direct competitor.
Lenovo’s strength lies in its experience with computers and its strong national distribution network, which it could use to help sell its own boxes. Xiaomi’s regulatory problems reflect the fact that it is the least experienced in online video. Its lack of a strong national sales network means it could also face a tough time for its product. And if past experience is any indicator, there’s also the possibility that one or more major names like Baidu, Tencent or Sohu could also soon enter the set-top sector, making the space even more crowded and competitive.
Bottom line: LeTV’s new Internet TV product marks the latest entry to a space that has strong potential for success but is also likely to see competition heat up sharply over the next year.
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