Quibi Lament: How Did Jeffrey Katzenberg Not Succeed with Record High Pandemic Audience Levels and $1.8 Billion?
Most of today’s major streaming services started with a lot less cash and available viewers
A couple of weeks ago, I sat in on a virtual panel featuring Tom Ryan, now in charge of ViacomCBS’ broader streaming business, but also still CEO of the conglomerate’s Pluto TV platform.
Ryan recalled getting his then-tiny AVOD service off the ground five years ago, as the startup—launched with $500,000 in seed money—struggled to convince backers that ad-supported streaming was a thing. Eventually, Pluto TV grew strong on more than $51 million in venture capital, and it was purchased by Viacom for $340 million early last year.
Speaking alongside Ryan, Tubi founder and CEO Farhad Massoudi spoke of a very similar, simultaneous trajectory. Ultimately, Tubi was able to amass $26 million in VC. Like Pluto TV, Tubi built an audience of more than 30 million regular streamers, and it got purchased by a media conglomerate, too, Fox for $440 million earlier this year.
Indeed, scroll through the major apps on your Roku, Fire TV—or whatever you use to stream—and you’ll find plenty of Horatio Alger stories. Even Netflix has one—last month, doing the media rounds to promote his new management guru book, CEO Reed Hastings recalled his David and Goliath meeting with the executive team of the then-powerful Blockbuster Video two decades ago.
That’s what makes Quibi’s abrupt failure, occurring after just more than six months in the market, all the more shocking.
Also read: Katzenberg Shutting Down Quibi Streaming Service
Forget founder Jeffrey Katzenberg’s chosen narrative—that Quibi was a platform designed for an active, on-the-go mobile market, which was obliterated by the pandemic. Quibi was thrust into the market on the strength of a robust national advertising campaign, highlighted by a multi-million-dollar Super Bowl commercial, and greeted with record-high audience levels for video, particularly the streaming kind.
Also read: TV at the Tipping Point
And Quibi also launched with a privately backed war chest of $1.8 billion, supported by some of the biggest advertiser brands in America, and it was creatively girded by the most famous names in the entertainment business. I tried listing just a cross-section of them while reporting on Quibi’s glitzy CES presentation in early January, an event that now seems like six years ago. There were too many names. it was hard to do.
“Our failure was not for lack of trying,” Katzenberg said in a note to Quibi staff Wednesday, confirming the decision to shutter the business. “The world has changed dramatically.”
Quibi never stood a chance in the pandemic? How many chances did this service need?
Distribution, of course, was a problem from the start.
When Quibi launched in early April, it was confined to iOS and Android mobile devices—a necessity, its backers insisted, to enable the platform’s most important technology feature, Turnstyle, the intuitive toggling between landscape and portrait that was integrated into the very narrative DNA of Quibi shows.
The essence of the service, its backers argued, would be lost on the living room TCL monitor. Might have been good to have that capability up their sleeve as a backup plan?
When early weak app download data revealed a less than stellar start for Quibi, Katzenberg and CEO Meg Whitman slowly came around the notion that the platform should also be streamable on the living room TV. But it wasn’t until June that Quibi started enabling “casting” via apps like Google Chromecast from mobile phones to TVs.
And it wasn’t until Monday of this week that Quibi finally announced native apps for Amazon Fire TV, Apple TV and Android TV.
“They should have had a TV-based app on launch day. Arrogant and inexcusable,” tweeted TV business analyst Phillip Swann.
For his part, Katzenberg’s storytelling genius—and contacts in the global film and TV business—remain beyond reproach. But he doesn’t have as proven a record as a navigator on the often rocky seas of video technology.
For example, DreamWorks Animation—which Katzenberg built from the ground up—was almost undone in the mid-aughts, when the DVD market suddenly cratered, and DWA was left with millions of unsold copies of Shrek 2 glutting its warehouses.
Hiring Whitman, whose most famous technology position was guiding an enterprise IT company, Hewlett-Packerd, maybe didn’t provide the DNA necessary to pivot quickly in the media-tech biz.
And that’s really what the core issue was for Quibi—despite some incremental adjustments, it never really pivoted from some of its flawed initial assumptions in the drastic, and decisive, way it needed to. Quibi needed to ditch the idea of being a cool tech company targeting Gen Z on mobile phones, and pivot its ample content investment into the now underserved general interest streaming market.
But Quibi's calculus concluded it simply needed to spend more money.
"We tried a lot of different things over the summer, whether it was payment-less free trial, 90-day free trial, 14-day free trial," Whitman told Deadline Hollywood Thursday morning. "We changed marketing around entirely to be more title marketing than platform marketing, which we made a lot of changes and we also you know, tried a completely different business model in Australia. And ultimately none of it really changed the fundamental answer, that we needed more capital and we needed more capital relatively soon."
There was plenty of smoke about problems related to company culture. Notably, Janice Min—the publishing business guru who oversaw reinventions of Us Weekly and The Hollywood Reporter—was brought in as a No. 3 under Katzenberg and Whitman. But she left in a huff months before launch, complaining of a top-down management environment with little opportunity for collaboration.
Meanwhile, Quibi’s top marketing executive, Megan Imbres, departed just weeks after launch.
There were existential questions about Quibi from media-tech analysts, many of them leery after Verizon’s gaudy Go90 mobile first failure, and many of them just simply nonbelievers in the fundamental concept of the Quibi model. The business of short form video serving young adults is lighting in a bottle, many of them postulated. It’s a world best served by happy-go-lucky entrants like TikTok. And there’s a reason why Nathan Apodaca—the Ocean Spray-drinking, Fleetwood Mac-loving longboard skating anomaly, who has become a viral phenomenon on TikTok in recent weeks—looks so old in his mega popular user-generated video.
At only 37, Apodaca has probably got around 20 years on the vast majority of his TikTok creator--and consumer--constituents. So what chance did Katzenberg, who will turn 70 in December, have with this same audience?
Again, with Netflix growing its stock price by 70% in a pandemic year in which it was supposed to be slowed by Disney Plus, HBO Max, Peacock and Quibi, Katzenberg probably had plenty of chances to capitalize on huge available streaming audiences, regardless of the device they were using. And regardless of their more advanced ages.
And again, he just didn’t pivot quickly enough.
"Given the investment that we were making, the quality and the quantity of the content that we were doing, we needed to really come out of the starting gate in a very big way in order for this to work," Katzenberg told Deadline.
When it didn't work, Quibi again had few answers but to add more money to the flame.
Speaking to the mogul in the weeks before Quibi’s April 6 launch date—and before shelter-in-place mandates started in mid-March—Katzenberg came off as a leader of streaming video business driven to large degree by gut. His point of emphasis: Quibi has great creative talent, all of whom are getting paid a lot money. Each minute of Quibi programming costs $100,000 to produce, he told me … and many other folks like me. How can Quibi not outdraw user generated video?
During that February conversation, Katzenberg also appeared resigned to the rigidity of a launch calendar seemingly set in stone. Perhaps that was determined by advertiser commitments?
Whatever the case, and even with the federal government sandbagging the true potential of the COVID crises through February, there was probably time to do things differently pre-launch, too. Katzenberg said Quibi had “the goods.” Did it really need to commit so much to Turnstyle, which seems like a gimmick in hindsight? Shouldn’t it have been about the goods, and not Turnstyle?
To borrow a phrase from the late great Bruce Lee, streaming video business models seem to work best when they’re like water, flowing to the best available viewing platform.
Apps for iOS and Android are table stakes for the major SVOD and AVOD services. But Netflix doesn’t serve just the mobile market, just as it doesn’t serve just Roku. The best model, particularly those at least partly supported by advertising, is to be available everywhere—the living room when your viewer is at home, the laptop, phone or tablet when they’re visiting grandma’s place.
That Quibi waited nearly seven months to launch connected TV apps was shocking. That the service didn’t quickly adjust to offer a free tier, as Comcast/NBCUniversal’s Peacock did, was another head-scratcher.
The $4.99 starter price wasn’t insurmountable. And the programming, some of it Emmy nominated, was, at times, enticing. All those advertisements during the NBA Playoffs on TNT for the Quibi show Wireless, purchased with the service’s coffers desperately circling the drain, had me thinking about a free trial on more than one occasion.
But I wasn’t going to set myself up for a trajectory of paying another five bucks a month to watch something largely confined to my phone at home.
So I can’t speak to the quality of Quibi shows, other than their tepid reviews and snippets posted on YouTube.
I can say that it’s disappointing, during these tedious months when there’s suddenly not enough good shows on television, to have the option of buying more original programming from top-notch creators disappear into the ether.
I wish I’d seen sampled some of it. I wish Quibi did a better job of making it available to me.
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Daniel Frankel is the managing editor of Next TV, an internet publishing vertical focused on the business of video streaming. A Los Angeles-based writer and editor who has covered the media and technology industries for more than two decades, Daniel has worked on staff for publications including E! Online, Electronic Media, Mediaweek, Variety, paidContent and GigaOm. You can start living a healthier life with greater wealth and prosperity by following Daniel on Twitter today!