Why Xiaomi is Investing in Streaming Media

1

November 21, 2014 by ...

Xiaomi recently  invested heavily in a Chinese media property. According to many this move is to provide content for Xiaomi’s TV and MiBox devices.

While this is true, there are other reasons for this strategy as well. For example, Chinese smart phone users spend quite a bit of time peaking at their handsets. This is born out by the data below.

averagetime spent

We can see that almost 75% of Chinese smart phone users reported using their phone from 1-8 hours per day. The breakdown of what they view on their cells is important, of course. Xiaomi wants to monetize user content and the best way to do this is by targeting their needs.

From the following chart we can see that 54% watch videos once per day or more.

video

The industry data is consistent with Xiaomi statistics as well.

20141116-193734-70654780.jpg

When viewed with the data above, it is obvious that this segment represents a potential cash cow for Xiaomi. Chinese are increasingly using their cell phones as a substitute for tablets and pc’s.

This makes sense when one consider that over one-half of all these consumers earn less than U$500 per month. Based on such an income level, even a tablet priced at U$250 could be cost prohibitive to many of them. Xiaomi’s inability to make money in this product group is a partial testament to this fact.

users by income level

Streaming content onto handhelds is thus a great idea. Contrary to what many are reporting, this is more likely Xiaomi’s goal.

Xiaomi an internet play?

Irrespective of what Lei Jun says, Xiaomi is not an internet play as of yet. Of course the recent investment is geared to change this. Once again, it is essential to note who Xiaomi’s market is at present in order to predict what will come of the recent moves.

For the most part Xiaomi’s customers are males who reside in the less affluent areas of China. These people are low-income earners and less educated as well. These people are less likely to buy Xiaomi TV sets and the like as they are cost prohibitive. In addition, smartphones are making such things redundant to low wage earners.

Xiaomi diversifying its customer base?

Of course it could be argued that Xiaomi is merely diversifying its customer base. It could sell phones to people who cannot afford TV’s and TV’s to those who can. The problem with this assumption, however, is that Xiaomi is still seen as a low-cost cell phone producer. Over 90% of their profit came from handhelds and that does not seem to be changing. Perhaps Lei Jun would like to use the internet play to change that, but as I said this will be difficult.

Even Xiaomi users don’t like the brand

A recent survey showed that when asked if they actually liked the brand, a paltry 23% said yes. This pales in comparison to the 70% that said the same thing about their Apple and Samsung units. Research by the current author corroborates this as well. Most Xiaomi users consider this to be their initial foray into the word of smartphones. They will ‘buy up’ once they have the financial means to do so. In other words, they merely buy Xiaomi out of necessity.

The fact is that Xiaomi has not established the cred to go upmarket as of yet. When given the choice to buy a Xiaomi TV versus a global brand, for example, Xiaomi will be hard pressed to convince them to buy.

Victim of their success

The more Xiaomi sells low-end phones, the more this image is reinforced. It is very difficult to change consumer perceptions when one starts at the bottom. A high-end player can easily sell mid-range goods, but the converse is not usually true. Companies which are known to sell on the cheap are not often taken seriously when they foray into the high-end.

Xaiomi’s startegy thus far has been to cement themselves as a low-cost alternative to high-tech gadgets. Any attempt to shed this image will be met with resistance. Xiaomi’s best shot is to stream content to handsets and monetize ad views.

 

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One thought on “Why Xiaomi is Investing in Streaming Media

  1. […] which has good value for the money. For them, Xiaomi is the ‘Apple of China’ and costs one month’s wages. As such, many buy a Xiaomi to show that they are upwardly mobile. Sure they cannot afford anything […]

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