By email@example.com (InfoseekChina)
China’s LeTV is different from traditional television platforms in that it mainly relies on content and advertising for profits while losing money on the hardware side of the business, Shanghai’s China Business News reports.
Television sets marketed by LeTV are not only sold for the price of the TV itself. Users also have to pay a content service fee for two years. Whether such a business model can be sustained depends on whether users will continue to pay.
In 2014, LeTV sold more than 1.5 million Super TVs and saw its revenue increase 188.98% from the previous year to 6.82 billion yuan (US$1.1 billion).
The company’s operating profit, however, fell 99.64% year-on-year to 864,000 yuan (US$137,700).
Because LeTV uses a low-price, high-volume strategy to market its TVs, it does not make money on its hardware segment, causing the company’s operating profit to decline despite growth in TV sales.
This has not deterred the company. LeTV vice president Zhang Zhiwei told China Business News that his company’s target this year is to sell 3-4 million TV sets, and if the number of subscribers can reach 5 million, revenues from advertising and other services will see geometric growth.
The company is now planning to launch a smartphone as well. Can the TV business model be applied to the mobile phone business?
According to analyst Liu Chuang, LeTV has been successful so far, but the success of its television business does not guarantee success for its mobile phone business.
Liu said LeTV will face big challenges in the smartphone market due to competition from low-price vendors such as Xiaomi, Huawei and Meizu.
Zhang countered, however, that content is LeTV’s greatest competitive strength, and he said the company will develop that strength to the fullest.
Source:: Content the main source of profitability for LeTV