Posted in new media thoughts

LeEco Makes Further Step into Sports: Buys a UGC Broadcasting Platform for USD 46m

After winning a couple of exclusive rights to broadcast sports events in both mainland and Hong Kong, LeEco, formerly known as LeTV(樂視), has accelerated its move into sports by acquiring a 100% stake in Zhangyu.tv.

Zhangyu.tv is a live broadcasting platform providing user-generated content from amateur sports commentators. Launched in early 2015, the company is among the fastest-growing tech companies in China, which has attracted 5000 amateur sports anchors and 5 million daily active users. It was recently acquired for RMB 300 million (USD 46M) by Le Sports, subsidiary of LeEco.

Why Zhangyu.tv?

In nature, before its acquisition of Zhangyu.tv, LeEco owns a sports channel on its video-streaming platform. Reason of this purchase may have taken at least three factors into consideration.

Screen Shot 2016-02-10 at 23.55.23
Zhangyu.tv is broadcasting a snooker game

First and most important, it is LeEco’s investment on the young generation. Zhangyu.tv has a huge user base of young people, who are passionate for sports and eager to interact as well as create content while watching games. Apart from LeEco’s previous channel of sports, which has a diversified and wide audience, Zhangyu.tv can provide a more concentrated group of sport lovers in terms of age and interest.

The second reason may sound a bit dramatic, but it is a peaceful way to deal with the copyright dispute between the two companies. Under the Copyright Law of China, live sports broadcasting was granted copyright protection since July 2015. From that time, LeEco has sued Zhangyu.tv for piracy. As the two companies have merged into one, the dispute can reach a compromise spontaneously.

Thirdly, it will also contribute a lot to LeEco’s vertical integration in the world of sports, which is expected to operating a package of sport event, content and value-added service accompanied with intelligent devices, said by CEO of LeSports.

So, how’s the eco-system of LeSports now?

From last year, LeEco have made several big moves into sports. Regarding to live broadcasting, all media broadcast rights in Hong Kong to the English Premier League and FIFA matches have been granted to LeSports. In Mainland China, it launched a three-year deal with Major League Baseball likewise. As live broadcasting is protected to be originality products, LeSports is seeking a high control on content supply, even monopolizing the Hong Kong market. This will make LeSports more flexible with its pricing policy and enlarge profit to some extent.

For value-added service, LeSports has purchased a soccer statistics company, named Soda Soccer, almost the same time buying Zhangyu.tv. It can be predicted that LeSports will continue integrating more Internet-based companies providing sports related service to maximize the utilization of resources in its eco-system.

The content on LeEco’s video platform serves as a unique selling point of its hardwares, starting from smart TVs to phones. Noticeably, it title sponsored a stadium in Beijing, planning to renovate it with intelligent sports equipment. Moreover, it’s even more ambitious to operate sports events in the future, after establishing a sports foundation and getting the naming right to a domestic football team, Beijing Guoan.

Screen Shot 2016-02-10 at 23.54.13
LeEco sells its phone Le 1s packaged with English Premier League games

 

Looking upon the present chain of LeSports, it has roughly formed a closed loop of sports industry within half a year, ranging from software (content) to hardware, and from events, players to audience. Sports will be the next field shaped by new technology, echoed with the rise of all kinds of fitness devices.

LeEco has captured a suitable and stable position in the market

Sports will be a market of ever-growing value. From consumer perspective, the demand for watching latest games without limitation, as well as the awareness for physical exercise and good fitness is sure to increase with time. On the other side, broadcasting copyright has lifted the entry barrier of content providers. In the short run, as a result, suppliers like LeSports will have more freedom to charge its consumers.

However, in the long term, suppliers will definitely face with more intensified competition to win the deals, which will increase the cost. This may also impose pressure on LeSports-like companies to make adjustment to previous price policy, because live broadcasting is considered as a relatively elastic product. But after all, the eco-system of LeSports may give the company more chance to survive, provided it can consolidate each link of its chain, and become more specialized in the vertical area.

The Chinese market is concentrated in many of the Internet related areas, featured by BAT’s domination and rapid extension. It’s rare for LeEco to capture some of the market share and start constructing its own empire from a video site. Sports sector is more like a blue ocean with less niche overlap. Current players in this industry compete for different games and events; for instance, Tencent won a broadcasting deal with NBA while Alibaba with boxing. Thus LeEco has found a smart area to start vertical integration. Additionally, LeEco extended its business from individual consumption (video site) to household (smart TV), and returned to individual (smart phones), always keeping with the pace of media development. Both help to consolidate its position in the market.

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