More than 1.5 million shipments of its smart TVs didn’t turn a profit for Leshi Xinzhi, the smart TV manufacturer in which LeTV has approximately 60% stake, according to LeTV’s annual financial report released last week.
LeTV reported top line growth of 189%, mainly driven by sales of smart TVs, but operating profits decreased by 100% due to it running a net loss in the smart TV business.
LeTV’s low-cost pricing strategy is intended to boost smart TV sales, hoping to to then turn a profit from content on its online video site. LeTV charges an annual fee for content consumption, but for now TV owners don’t have to pay for the first two years. Hence, how much more revenue will be generated will depend how long users would like to use their LeTV smart TV. Buyers may prefer to change TV instead of paying fees for content, considering the manufacturing costs of consumer electronics will continue to fall.
LeTV smart TVs range from RMB2100 (US$340) to RMB4999 (US$800), so total revenues from hardware sales could account for half of LeTV’s total annual income of RMB6.8 billion (about US$1bn), or more. So its revenues from other services such as online video streaming failed to grow quickly in 2014.
LeTV launched two more hardware products in 2014 and began to sell third-party hardware products such as headphones. It’s as yet unknown whether or when they’ll generate meaningful revenues for LeTV.
LeTV expects to ship 3-4 million smart TVs this year. The company will launch its first smartphone in a couple of months. The company’s management have said they’ll take the same pricing approach for their smartphones.
Editing by Mike Cormack (@bucketoftongues)