LeEco, Are You Running Li Yuchun's Concert, or Selling LeSports Memberships?

Is the so-called ecosystem really just "buy one, get one free"?

At 8pm on June 28, tickets for the Beijing stop of Li Yuchun's "Wild Growth" tour went on sale at the same time on Yongle Ticketing and the LeEco Mall. "Nan Dodo," who had sat in front of her computer all day, grabbed an 1,880-yuan floor seat in the 59th second. She was lucky: that night 2.06 million people went after a total of 10,000 tickets, with about 3,000 people competing for every floor seat.

Nan Dodo has plenty of combat experience. She became a "Corn" — the name Li Yuchun's fans go by — after the 2005 season of Super Girl, and has gone to see Li Yuchun almost every year since.

This year her ticket came with a special name: the "ecosystem ticket." Besides admission to the concert, she got two other things — a 590-yuan annual LeSports Super Member card and a 100-yuan Yidao Yongche voucher.

LeEco Music is the promoter of this year's "Wild Growth" tour, which plays five cities: Beijing, Shenzhen, Fuzhou, Nanjing and Chongqing. All of the tens of thousands of people at those five shows get a LeSports membership, for varying lengths of time. And from June 29 to July 8, anyone who failed to get a ticket can still buy a monthly LeSports Super Member card for a shot at a raffle for a box seat.

This is what LeEco calls its ecosystem. Or rather, it is one way LeEco keeps that ecosystem going.

"The connection isn't that direct, but I think there will be pleasant surprises. Chunchun's fans themselves may not like sports, but their husbands might. And you can't rule out that plenty of women like sports too... We're using the value of our ecosystem to tell more people that we have more services to offer."

The speaker is Yin Liang, CEO of LeEco Music. He used to be a music journalist, and he went into video at LeEco because he "didn't see a future in streaming media." Video has indeed been LeEco's main draw for viewers: in 2015, LeEco Music livestreamed Li Yuchun's "Why Me" tenth-anniversary concert to 5 million simultaneous viewers. Another fan who got a ticket for the Beijing show, "Corn 18," already owns a LeTV television and likes to leave concerts playing as "background noise."

Livestreamed concerts have only been hot for about two years. In August 2014, Yin Liang struck a deal with Wang Feng to put his Bird's Nest concert on LeEco Music, and 75,000 people paid to watch — the event that marked the arrival of the concert livestream.

More competitors followed. Video sites including Tencent and Youku Tudou launched music livestreaming channels; Modern Sky, which runs the Strawberry Music Festival, launched an app called Zaixianchang ("Live Now"); and Wang Feng himself invested in a livestreaming app called Yema Xianchang ("Wild Horse Live").

LeEco calls running commercial concerts a strategic shift for LeEco Music. The card in its hand is Li Yuchun.

Yin Liang stressed that LeEco Music staged 370 online shows last year, and that having "connected online and offline," the next step is to "build services around the consumption scenarios of music users."

As in every public statement LeEco makes, he slipped into talking about disruption: "The way I see it, we're building a completely new industry, not the traditional live-events business... What's going to change in the live-events business, worldwide, is that it will develop a service standard. That standard has to be built up step by step, and building it takes very strong resource-integration ability. Whether you hand out hamburgers, baozi or mantou in the middle of a show doesn't matter. What matters is that it's a service — a service that doesn't disturb the order or the experience of a live show, a service people want and enjoy."

LeEco hasn't disclosed a detailed revenue breakdown, but Yin Liang said the tickets for the five stops are worth roughly 50 million yuan on their own, and that online and offline advertising plus paid-member livestreams will bring total revenue to about 100 million yuan.

Traditional live-event operators can't match that. Exclusive rights to manage an artist mean access to a large pool of advertising sponsorship and promotional resources. This March, Tencent Music held the exclusive livestream of the final stop of BIGBANG's world tour, and 160,000 people paid to watch — a Chinese record for a single livestreamed concert. Tencent invested US$30 million in South Korea's YG Entertainment, which gave it exclusive online music rights to BIGBANG, Psy and other artists.

One rumor had it that Alibaba paid an exclusive agency fee of as much as 100 million yuan to run Faye Wong's concert at the end of the year. The report was never confirmed, but what is said to be certain is that some platform paid a high price to livestream the show — possibly Ali Planet, the newcomer.

In this cash-burning fight over rights, though, LeEco's head start no longer counts for much. Early this year LeEco announced it had recruited Yao Qian, a veteran of the Taiwanese music business who wrote the lyrics to Faye Wong's I'm Willing, and given him the job of "upstream resource integration" — plainly put, finding more stars and more exclusive content.

But against everything else underway, Li Yuchun comes first. "They [Tencent] have BIGBANG, we have Chunchun," Yin Liang said flatly.

LeEco wastes nothing, so it also wants Li Yuchun's popularity to help another of its companies: LeSports. Of all the pieces of LeEco's "ecosystem," LeSports currently carries the most concepts, and is the one most worth a gamble in the capital markets.

The Beijing stop of "Wild Growth" is at the "LeSports Ecological Center" (Wukesong Arena). At the end of 2015, LeSports announced that it had outbid MasterCard — the figure was never disclosed — for five-year naming rights to the arena.

LeSports was formally spun out of LeEco in the first half of 2014 to run as an independent company. That September, state authorities explicitly called for developing the sports industry: loosening restrictions on event broadcast rights, pushing ahead with reform of professional sports, and encouraging professional leagues. All of it was read as good news for sports in China.

In May 2015, LeSports raised 800 million yuan in a first round led by Wanda Investment and Yunfeng Capital, at a valuation of 2.8 billion yuan. In April 2016, not long ago, it closed an 8-billion-yuan Series B that put its valuation at 21.5 billion yuan.

With that money behind it, LeSports has expanded fast: investing in Beijing Guoan, running events such as the International Champions Cup and city marathons, developing hardware like bicycles and drones, investing in Octopus Lottery.

The Wukesong naming rights look more like one large advertisement. Since the Beijing Olympics, the arena has hosted NBA China Games, the CBA All-Star Weekend, the CBA Finals and a long list of other events. It is also one of the city's best-known concert landmarks. All of that is advertising for LeSports.

But as QDaily has reported, LeSports also has to prove it can make money. Against that 21.5-billion-yuan valuation, its 2015 revenue was 502 million yuan, with 2.844 billion yuan projected for 2016. The crowd of retail investors who piled into its funding rounds has also fed a suspicion outside the company: that LeSports looks like a speculative instrument driven by capital.

LeSports makes its money today from advertising on its video site, from running events, and from the membership fees it has just started to collect. Li Yuchun's job is to pull on that last one, and to help LeEco find its target users.

In 2015, LeEco Music invested in East District Story, a small livehouse in the 798 Art District used for hip-hop, folk and electronic shows. A commercial show the size of Li Yuchun's needs a venue like Wukesong. LeEco has no way to estimate how many of the fans who come for Li Yuchun will turn into paying LeSports users, so it has simply made the whole thing one big promotion — at minimum putting the brand in front of more people.

How much of that counts as an ecosystem is harder to say.

LeEco isn't the only one thinking this way. In June, Alibaba announced deals with the National Stadium (the Bird's Nest) and the National Aquatics Center (the Water Cube) to work together on market-based operations and venue development — which may also be a condition of Alibaba hosting Faye Wong's concert.

On the venues themselves, LeEco and Alibaba stress the same goal: making them smart. Alisports announced a 10-billion-yuan fund for building smart venues in June. LeSports has launched a smart boxing gym. Hupu Sports started a smart-sports-venue project last year. None of it has produced anything real yet. For now, the smart venue is a concept.

In today's investment market, a concept is enough. Just as film and television companies talk up "VR," the pretty picture of "smart" technology goes over well with partners and investors alike — especially when none of these companies can say for certain that they will ever turn a profit.

Asked what she expects from a "smart venue," Corn 18 was vaguely hopeful: "When the time comes, watching the livestream, or walking into the arena, might feel a little different." And if nothing is different? She said she wouldn't mind much. What she cares about is that ticket prices "didn't go up because of the ecosystem."

To Yin Liang, the Yidao Yongche voucher in the "ecosystem ticket" already counts as a "service upgrade" — even if the logic behind it is subsidized promotion. LeEco spent US$700 million last October to become Yidao Yongche's largest shareholder. Whether the voucher actually makes it easier for concertgoers to get away from the arena does not appear to be LeEco's main concern.

The crucial piece, of course, is the sports memberships. The tens of thousands of new sports members from Li Yuchun's five stops will all land in LeSports's year-end accounts. Since April, LeSports has been formally separate from LeTV's membership system, with a sports membership plan of its own. On July 3, it released numbers for the LeSports Super Member program for the first time: 1.5 million paying members since the April launch.

Those numbers will also be important chips in LeEco's game with the capital markets. Whether the Corns ever watch any sports, by contrast, seems to be something that can be left to take its course. Nan Dodo never watches sports but is thinking of giving her membership to a friend. Corn 18 said she'll keep hers, "for the Olympics."

That is what the "ecosystem ticket" really is: a fruit shop handing out a free orange to taste when you buy cherries, since it all comes from the same store. Less a solution than a joint promotion.

LeEco Music in fact built in extra steps to squeeze out more promotion. Anyone who pre-registered for tickets on the designated page got a LeTV membership worth 50 yuan — even though pre-registering had little to do with whether you got a ticket.

LeEco memberships are already everywhere. At the "4.14 Ecosystem Day" promotion, LeSports announced a "buy a membership, get free hardware" plan: buy a two-and-a-half-year LeSports membership (1,475 yuan) and LeEco throws in a television (1,699 yuan); buy five years (2,802 yuan) and you get a Le Max phone (3,299 yuan). For LeEco as a whole, that makes the year-end hardware sales figures look better. And more people watching LeEco's screens helps its content pick up more users in turn.

Barring surprises, there will be more bundling in the second half of the year. Yu Hang, LeSports's COO for strategic resources, said earlier: "We'll have promotions running continuously. We'll keep tying them to this being a big year for sports, and to the events we're running ourselves."

This is the thing LeEco does best: before anyone has examined a single detail, a whole new landscape seems to have opened up.

So for the Corns holding an "ecosystem ticket," is Li Yuchun's concert any different?

"Doesn't feel any different. If I can't make it to the show, I guess I can watch the livestream," Nan Dodo said.

Cover image from a Li Yuchun promotional photo and mrbuleishaw