LeTV spilled first post-listing red ink in 2016
Smart-TV marketing costs put pressure on earnings
DAISUKE HARASHIMA, Nikkei staff writer
SHANGHAI -- Leshi Internet Information & Technology, or LeTV, reported Thursday a roughly 340 million yuan ($49.4 million) operating loss for the year ended December, sliding into the red for first time since the Chinese company's 2010 listing as heavy spending on marketing for a new area of business took a toll.
The Shenzhen-listed company behind the video-streaming service that bears its nickname saw sales shoot up 69% to 21.9 billion yuan. While online video distribution is its mainstay, LeTV had also begun selling packages that bundle streaming with internet-connected smart televisions. Spending on marketing to support this, such as advertising and adding more salespeople, put pressure on profit.
In LeTV's annual report, an accounting firm warned of heavy intragroup transactions. Chairman Jia Yueting had plugged a funding hole created when capital did not come in as expected late in the year.
LeTV was founded in 2004 as an online distributor of such content as TV shows and cartoons. Its smart TVs became a major hit in China, selling more than 10 million units, thanks to prices undercutting the competition by 30-40%.
The group announced last July plans to purchase major U.S. TV manufacturer Vizio for $2 billion. But it called off the deal this month over what it deemed "regulatory headwinds," dashing its hopes of growing sales further by capitalizing on Vizio's large market share in North America.
Group companies were also planning sales of package deals of smartphones and video streaming. But concerns over worsening capital management grew as Taiwanese media reported on delayed payments to phone parts makers.