Quibi: the best laid plans meet the Coronavirus
What will become of Jeffrey Katzenberg and Meg Whitman’s new on-the-go streaming service when American’s are off-the-go and sheltering at home?
By Jeffrey Cole
The best laid plans!
All the money was raised, everyone was on board, a great team had been assembled, and the best possible talent flocked to the effort. Everything was ready. Jeffrey Katzenberg did it all perfectly. It seemed blessed, and little could go wrong.
And then came the greatest disruption of our lifetimes: the Coronavirus struck.
In August of 2018, when the major studios were pulling their content off of Netflix and announcing their own streaming services, Jeffrey Katzenberg saw an opportunity.
Katzenberg had the experience and insight to seize an opportunity when he saw one. When Michael Eisner left Paramount in 1984 to take over a moribund Walt Disney Company, he brought his head of production, Katzenberg, along to run the motion picture division. Katzenberg achieved extraordinary success both there and in the animation division before running into relationship problems with Eisner and Roy Disney. Katzenberg left Disney in 1994.
Eager to prove he could run a studio, Katzenberg co-created DreamWorks SKG (he was the “K”) with Steven Spielberg and David Geffen.
In 2018, Katzenberg saw all the other players rushing to create streaming services featuring mostly scripted entertainment one hour or longer (there were some 30-minute sitcoms) geared to a general audience. What Disney, Apple, WarnerMedia and Universal were planning (and began unveiling in November 2019) were their versions of Netflix.
Katzenberg saw an opening for something completely different.
Netflix was created before most people had smartphones. Although many subscribers today watch Netflix and Hulu (and now Disney+ and YouTube ) on their tablets or phones, it was primarily intended for large screens at home. It was programming designed to sit and enjoy: dinner and a movie has become Netflix and Uber Eats.
What the studios and tech companies missed, but Katzenberg didn’t
In the studios’ and tech companies’ efforts to steal Netflix’s business, they left open a small door. Katzenberg, and later his partner, Meg Whitman (CEO during the fantastic growth years of eBay), started preparing to walk through it.
That opportunity was to create original programming for Gen Z and Millennials to watch on their phones. Watching on smartphones meant watching during small breaks in the day: at work or at school, in the car, on public transport, or during some other lull in the schedule.
They called the proposed service Quibi for “Quick Bites.”
If Netflix meant medium to long-form programming, Quibi would focus on 7-10 minute “bites.” with advanced viewing technology such as effortlessly moving between landscape and portrait formats.
Quibi, even in the best of times, always had some serious obstacles. First, does its audience really need short-form content on their smartphones? Couldn’t viewers themselves take a seven-hour show everyone is talking about, like Tiger King, and instead create 5-to-20-minute segments? Does the world need an additional service? The answer, as with all the services, rests on the quality of the content.
Rather than create a YouTube-like marketplace of user-generated content, Quibi went to the biggest names in entertainment to create its short-form content: Steven Spielberg, Chance the Rapper, Reese Witherspoon, Chrissy Teigen, Liam Hemsworth, Christoph Waltz, and many more.
Quibi promised 175 shows and 8,500 bites in its first year.
Although some were skeptical of a short-form channel aimed at young people, no one wanted to bet against Katzenberg’s track record. The Quibi effort was hardly treated as a startup. Katzenberg and Whitman raised over $1 billion from Disney, Fox, NBC, and Alibaba. The cost to subscribers would be $4.99 a month with commercials and $7.99 without. Fans could start with a 90-day free trial.
That puts the Quibi monthly price below Netflix and HBO and on par with Hulu, Apple TV+ and Disney+.
Quibi assembled an executive team of some of the best talent in the entertainment business.
They did it all: raised the money, got the team in place and produced high-profile content. It seemed as if nothing could get in their way.
And it was all scheduled to begin on April 6.
Things fall apart
In the last month, life as we know it has completely changed. Is this an existential threat to Quibi? Certainly, it is a massive challenge to how Quibi was originally conceived.
Katzenberg saw Quibi as the opposite of Netflix, an on-the-go service for young people during the breaks in the natural rhythms of their life. Since the middle of March, and probably for the next two-to-three months, or maybe much longer, there are no natural rhythms in our lives.
For the first time since many of us were children, we have enough time: we are forced to stay in our homes, and the things that fill up our days, work, school or watching sports have been cancelled or moved online. Now, we have time for Netflix and long-form. Many of us are catching up on all the series that friends tell us “we have to watch.” Already a 7-part docuseries on Netflix, Tiger King, has become a massive ratings success, a cult hit, and an icon of sheltering at home.
Today, unlike when it came to Netflix in December, we welcome the 3.5 hours of The Irishman!
Quibi is arriving at precisely the wrong time. Of course, none of this is Katzenberg’s fault, and no one in their worst nightmares could have predicted the most horrible epidemic and change of life in at least 102 years, if not ever.
Perhaps Quibi will get lucky. Even though they’re bombarded with entertainment, because people suddenly do have time, maybe they’ll take advantage of the trial offer. As painful as it may be, Quibi needs to extend the trial offer to at least two months after isolation ends, so viewers can integrate the videos into the restored rhythms of their lives. Coronavirus could be an opportunity but Quibi may have to forego revenue for a while (they do have advertising). Over $1 billion in raised funding should help.
Beyond the Coronavirus challenge: a paradox
Quibi, even in the best of times, always had some serious obstacles.
First, does its audience really need short-form content on their smartphones?
Couldn’t viewers themselves take a seven-hour show everyone is talking about, like Tiger King, and instead create 5-to-20-minute segments? Does the world need an additional service?
The answer, as with all the services, rests on the quality of the content.
As I have argued in these columns for years, “Content is kinger than it has ever been.” Quibi without the pandemic would succeed or fail on its ability to create “must see” content that can be talked about virally. In that effort, Quibi has minimized the risk by attracting the best talent.
The other obstacle for Quibi to overcome is to get their Gen Z, Millennial audience to pay at least $4.99. This is a problem that so worries Apple and Disney that they have cut deals to make their services available for free if people buy Apple products or subscribe to Verizon unlimited data plans.
The Quibi paradox is that it is asking an audience that believes all content should be free to pay a monthly fee. This audience is the users of YouTube, which is free to watch and also free to upload content. Quibi is trying to get $5 a month from a group that is still borrowing their parents’ Netflix, HBO Go, Hulu, and other passwords. Long term, this may be Quibi’s biggest challenge.
Perhaps the Coronavirus epidemic will be a momentary blip or even an opportunity in the Quibi story, but I doubt it.
If you were creating a business school casebook on how to start a new video service, Katzenberg followed all the rules. The chances of failure should be considerably minimized.
It just wasn’t possible to anticipate the greatest disruption in a century.
Jeffrey Cole is the founder and director of The Center for the Digital Future at USC Annenberg.
See all columns from the center.
April 6, 2020