Quibi Should Not Be Ignored
Ever since Quibi was first announced in 2018, the most common sentiment from journalists, consumers, and even many industry insiders has been skepticism. Critics have ridiculed the startup for raising nearly $2 billion before ever launching a product publicly, for charging too high of a price in the middle of the “streaming wars,” for running an advertisement during the Super Bowl without having a live product, and everything in between. These criticisms actually reveal how little those critics understand the premium video industry. If Quibi does not succeed, it will not be due to the company’s execution, it will be because their thesis was wrong from the outset — and the only way to prove a thesis wrong is to test it in the best possible conditions.
Quibi is a premium subscription video-on-demand service led by Hollywood veteran Jeffrey Katzenberg and tech veteran Meg Whitman. The service launches on April 6, 2020, and will be available only on mobile phones. The idea behind the product is that consumers are glued to their smartphones more than ever and that there’s a lack of high-quality, short-form native content for these devices. We may spend time flipping through TikTok videos, viewing Instagram stories, or even watching YouTube clips — but is there an appetite for professionally made, high-quality storytelling on our phones?
Quibi’s content will consist of short-form episodes or “quick-bites” (hence, “Quibi”) that are 10 minutes or less and are released daily or weekly. To date, the company has raised $1.75 billion from major Hollywood studios and has top-tier talent creating content for the platform. The subscription service will charge $5 per month for ad-supported streaming and $8 per month for an ad-free experience, making its ad-free tier more expensive than recently launched AppleTV+ and Disney+.
All of this has had industry critics rolling their eyes at how obvious of a failure they believe it will be — no one wants to watch premium content on their phones! Part of this skepticism stems from the failed history of mobile-first video platform attempts, which includes Verizon spending hundreds of millions of dollars on Go90, which launched in 2015 and shuttered less than three years later.
Before dismissing Quibi because other mobile video attempts failed in the past or the large amount of capital invested prelaunch, I think it’s worth taking a deeper look at what Quibi does have going for it.
As Disney and Apple have recently discovered, it’s imperative to have a deep catalog and robust content pipeline in order to launch a new subscription video service. If customers show up and are able to consume all of the content that interests them without fresh content arriving regularly, they likely won’t see the value in maintaining a subscription. More than a few Apple TV+ viewers watched The Morning Show and then disappeared, which is now contributing to low viewership concerns at the company.
Quibi seems well-prepared from a catalog standpoint, launching with 50 shows and rolling out 175 total shows over the first year of operation. The service has also prioritized producing a variety of content, offering a mix of programming including drama, thrillers, comedy, animation, reality TV, news, and even horoscope information.
The company has done at least one thing absolutely right — it has paid to get A-list talent to create and star in brand new content in Quibi’s custom format for the service, spending more than $100,000 per minute on many of its shows. This was one of the failings of Verizon’s Go90 attempt — it didn’t have the capital or stature to lure top-tier talent to create content. In the premium content industry, it’s all about the talent, which happens to be very expensive.
Quibi has lined up scripted and unscripted projects from entertainment A-listers including Guillermo del Toro, Antoine Fuqua, Steven Spielberg, Sam Raimi, Jason Blum, Steven Soderbergh, Trevor Noah, Liam Hemsworth, Anna Kendrick, Idris Elba, Chrissy Teigen, Jennifer Lopez, Reese Witherspoon, and LeBron James, among many others.
One of the smartest moves by Quibi was to create a subset of content called “Daily Essentials,” which will have new installments released on a daily basis from partners including NBC News, BBC Global News, CBS’s 60 Minutes, ESPN, TMZ, Telemundo, Entertainment Weekly, and others. Not only has Quibi partnered with established entertainment brands instead of competing with them, but it has also created a content release schedule that is habit-forming, keeping consumers coming back every day, instead of binging content once and having no reason to return.
Quibi therefore likely has the content volume, diversity, quality, and release schedule best suited to attract and retain subscribers to a brand new service.
Diving deeper into Quibi’s content strategy reveals yet another layer of ingenuity not visible to the public — the company’s content licensing strategy. Instead of building out an internal studio and producing content itself as other platforms increasingly verticalize, Quibi is licensing its original series and movies from other studios exclusively for a limited time. Every Quibi series and movie is exclusive to the service for two years in all formats and for seven years in the “Quibi” short-form format.
First, this strategy allows Quibi to pay less for content on its platform. Quibi is essentially “renting” the content that it is commissioning, paying less than if Netflix, HBO Max, or Apple were bidding for it on their platforms. Second, this allows Quibi access to top-tier talent at other studios. Instead of competing for talent with other studios, Quibi can work with them in an arrangement that is mutually beneficial. Katzenberg told the Hollywood Reporter that the structure of Quibi’s licensing deals was fundamentally about the access to talent, saying “It wasn’t about the money. The essential thing in having [other studios] as our partners was the access to their showrunning talent and their IP.”
Quibi’s bet is that the vast majority of the value of its “quick-bites” will come from when they first launch and are fresh, not years down the line. With this philosophy, Quibi is willing to give up rights years from now in order to invest in a higher volume of content and a more robust content pipeline, keeping the catalog fresh for consumers coming back on a daily and weekly basis.
Quibi has also been deliberate with its pricing and monetization strategy, prebooking $150 million in ad sales from marquee brands like Google, Walmart, Procter & Gamble, and Anheuser-Busch. The company has positioned itself as a “safe place” for advertisers looking to reach younger demographics who don’t have cable subscriptions without the concerns of advertising next to questionable user-generated content on platforms like YouTube.
Some see the company’s fees of $5 a month for ad-supported and $8 a month for ad-free subscriptions as too high for a new entity in an increasingly competitive premium video environment, but this demonstrates confidence in the consumer proposition. If Quibi was priced any lower, it likely wouldn’t attract enough incremental price-sensitive subscribers to offset the lower average revenue per user. It’s also much more difficult to raise prices soon after launch to make the economics work if fewer people subscribe than expected. Quibi is already launching with a 90-day free trial, after which it believes the service will continue to have enough quality fresh content, and users will have formed a regular habit of opening the app to start paying for continued access.
Quibi has also formed a partnership with T-Mobile similar to Disney’s deal with Verizon to offer a free yearlong subscription to Disney+. According to former Disney CEO Bob Iger, 20% of the 28.6 million subscribers who signed up for Disney+ through the first three months were from Verizon. The T-Mobile partnership will likely lead to a significant number of subscribers for Quibi.
Quibi’s strategy — from content licensing to partnerships, promotions, monetization, and pricing — has been very intentional and aligned, which is a testament to the leadership at the two-year-old company.
In just about any conversation in Hollywood about Quibi, a warning is accompanied with “don’t bet against Jeffrey Katzenberg.” Katzenberg was formerly the chairman of Walt Disney Studios from 1984 to 1994, overseeing hits like The Little Mermaid, Beauty and the Beast, Aladdin, and The Lion King, all of which contributed to a reinvigoration of the media giant. After leaving Disney, he co-founded DreamWorks SKG with Steven Spielberg and David Geffen (hence, SKG), and eventually spun off DreamWorks Animation as a public company that was subsequently acquired by NBCUniversal years later for $3.8 billion. Katzenberg has a rich history of running businesses that partner with creatives to unleash powerful and captivating stories that reach the cultural zeitgeist, and his track record gave the company the clout it needed to hit the ground running.
One industry insider noted that this was imperative to Quibi’s ability to recruit and lure creative talent, telling the Hollywood Reporter, “Jeffrey’s relationships with everybody in town allowed him to get a lot of traction very quickly.”
While Katzenberg has driven the creative side of the business due to his track record, experience, and industry relationships, he installed Whitman to oversee the technology component and overall management. Whitman was previously the CEO of Hewlett Packard, and before that, she served as the CEO of eBay, growing it from 30 employees and $4 million in revenue when she joined in 1998 to 15,000 employees and $8 billion in revenue when she left the company 10 years later. Her experience leading technologists in Silicon Valley is an asset that most media companies would have benefitted from as they respond to disruption in the industry and changing consumer behaviors.
In a company that is attempting to marry technology and storytelling, you’d be hard-pressed to find a more experienced and accomplished duo from each side of the aisle willing to bet their reputations on a brand new endeavor instead of resting on their laurels.
Okay — this was potentially a bigger strength before a global pandemic stopped the travel and commutes of millions of Americans. Quibi was originally designed to be consumed primarily on the go, out and about, and out of home — not sitting on the couch in quarantine. This is not the ideal time for Quibi to launch under its original primary user-case assumptions. On the other hand, there is a case to be made that people have more free time now, and their appetites for fresh, high-quality content are insatiable. While other streamers are beholden to their ongoing production schedules for new content, Quibi has stockpiled a large volume of original content that will begin to launch on April 6 and trickle out on a daily and weekly schedule. Whitman has also mentioned that the company is willing to adjust strategy depending on data and user feedback: “Up until April 6, when we launch on Monday, this has been about instinct, judgment, pattern recognition … all the trends. Starting April 7, this will be about data. And if all of our users are saying, ‘We really want to be able to watch this content on our big screen,’ then we’ll develop the capability to do that.”
Regardless of whether a pandemic is a good or bad environment for Quibi to launch in, there has never been a better time for a mobile-focused premium video product to launch from a consumer behavior perspective. Timing is everything when it comes to new consumer behaviors, and it’s difficult for any one company or product to train users to adopt a new behavior, though many have tried. In 2020, people are spending more time than ever before watching video on their phones — through apps like TikTok, Instagram, Snapchat, and YouTube. Katzenberg highlighted this strategy in an interview last summer:
Our service is exclusively about what you do from 7 a.m. to 7 p.m. on your phone. And what you’re doing today, if you’re in our core demographic of 25- to 35-year-olds, is you’re actually watching 60–70 min of YouTube, Facebook, Instagram, and Snapchat. That growth is now a well-established consumer habit that Quibi is sailing into.
In the same way that video on the internet primarily started as user-generated content (UGC) on sites like YouTube but eventually evolved into the high-quality, premium subscription content of Netflix, Quibi’s bet is that consumers are ready for the same level of quality video content on the mobile devices where they’ve been trained to watch UGC. Go90’s attempt to launch a mobile-video service made a lot of missteps, but one of the most fatal was likely launching in 2015, years before consumers were ready.
Although Katzenberg had reportedly been thinking about mobile-native premium video for years before founding Quibi, he waited until he felt that the prevailing trends and consumer behaviors reached a point that would be optimal for success.
For well more than a year now, pundits have opined on “the streaming wars,” or the increase in subscription video-on-demand products for consumers, from the established incumbents like Netflix, Amazon Prime Video, and Hulu to new and upcoming entrants like Disney+, Apple TV+, HBO Max, and Peacock.
When people hear about Quibi, they often consider it as just one more streaming service. The truth is, Quibi will be differentiated in ways that all the other streaming services aren’t: It’s meant to be viewed outside the home, it’s the first well-capitalized attempt at premium short-form content, and it’s only available on mobile devices. Katzenberg himself has said that he doesn’t see other streaming services as competition because he believes Quibi will serve an entirely different consumer use case. People won’t be choosing between Netflix or any of the other streamers and Quibi — they’ll either find value in Quibi, or they won’t, and that is mostly within the company’s control.
It is, of course, entirely possible (and maybe even likely) that Quibi launches and is a complete dud, costing years of work from thousands of people and burning nearly $2 billion, as critics seem to assume it will be. Even if that is the case, I think it’s worth applauding making such a bold bet and appreciating the strategy and decisions that have been made prelaunch.
After all — what did Netflix do right? It spent big money and had the right mix of “tech” and “talent” to deliver premium content to people in a way they preferred viewing. And yet, all along the way, Netflix was ridiculed and dismissed by industry insiders — even the heads of major media companies who, for instance, compared Netflix to “the Albanian Army.” While it’s obviously an oversimplification to compare Quibi to Netflix, it is notable that Quibi is making a similar bet.
If Quibi is not ultimately successful and sustainable, I don’t believe it will be due to poor decision-making or a failure to execute, as critics seem to believe. Rather, it will be that Quibi’s fundamental thesis — that people are watching more video on their phone and would be willing to pay for the same quality of content they watch on Netflix at home — is proved wrong. In any case, I think Quibi’s bold bet and intentional strategy should be admired and applauded, not ridiculed. In the premium content business, you either go big or you go(90) home.