Speaker 1: Welcome to Tech Stuff, a production from iHeartRadio. Hey there,
Speaker 1: and welcome to tech Stuff. I'm your host, Jonathan Strickland.
Speaker 1: I'm an executive producer with iHeartRadio and I love all
Speaker 1: Things tech and. On April sixth, twenty twenty, a video
Speaker 1: streaming service called Quibbi launched in the United States. Unlike
Speaker 1: streaming services like Netflix or Hulu, Quibi's content is short form,
Speaker 1: though extremely highly produced. They are episodes or movie chapters
Speaker 1: that time out at around ten minutes or less. The
Speaker 1: whole idea was to go after a relatively untapped market,
Speaker 1: people who have a little bit of time to kill,
Speaker 1: but who don't have the ability to sit down for
Speaker 1: a full half hour or longer and watch a movie
Speaker 1: or TV show. Quibi would go after folks who might
Speaker 1: be standing in line or otherwise doing next to nothing.
Speaker 1: It would really be the smartphone crowd. Quibi would help
Speaker 1: people fill in those short gaps of the day that
Speaker 1: aren't really dedicated to something else. When Jeffrey Katzenberg first
Speaker 1: started working on the concept a couple of years before launch,
Speaker 1: it seemed like it could be a really big thing,
Speaker 1: a potential hit. But Quibi didn't count on COVID nineteen.
Speaker 1: I mean, to be fair, none of us did, and
Speaker 1: in fact, even when it was becoming more apparent, a
Speaker 1: lot of us were not giving it enough attention, and
Speaker 1: COVID nineteen would change the landscape dramatically, taking the legs
Speaker 1: out from under Quibi before it could even launch. So
Speaker 1: today I'm going to talk about Quibi, how it went
Speaker 1: from idea to service, and how the era of COVID
Speaker 1: nineteen has really messed the business plan up for the company.
Speaker 1: But let's get into the history of Quibi. Our story
Speaker 1: starts with a famous media businessman, Jeffrey Katzenberg. He was
Speaker 1: born in New York City in nineteen fifty. He attended
Speaker 1: New York University for a year and then held a
Speaker 1: series of odd jobs before being hired on in the
Speaker 1: mail room of Paramount Pictures. The CEO of Paramount was
Speaker 1: another famous movie businessman at that time, Michael Eisner. Katzenberg
Speaker 1: worked up through the mail room all the way to
Speaker 1: the position of president of the Motion Pictures and Television
Speaker 1: Production Division. When it comes to American dream stories, this
Speaker 1: one really seems to fit the bill. In nineteen eighty four,
Speaker 1: Eisner shifted over to Disney and Katzenberg joined on as
Speaker 1: a junior partner. At the time, while the company had
Speaker 1: an enormous vault of beloved movies and animation, and the
Speaker 1: theme parks were still you know, real vacation destinations, the
Speaker 1: company itself was kind of in the doldrums. Creatively speeding,
Speaker 1: Eisner and his team helped transform that. Katzenberg oversaw the
Speaker 1: animation division as well as Touchstone Pictures, the movie studio
Speaker 1: that made stuff for you know, adult audiences, and he
Speaker 1: gained a reputation for being quick to cut anything he
Speaker 1: saw as dead weight, downsizing the division in the process
Speaker 1: in order to cut costs. But his ruthless aggression worked.
Speaker 1: The division had been bringing in about three hundred and
Speaker 1: twenty million dollars in revenue before he was brought on,
Speaker 1: but by the end of his run it was close
Speaker 1: to four billion dollars. Katzenberg was good at his job.
Speaker 1: Along the way, Disney had its renaissance in animated films
Speaker 1: with releases like The Little Mermaid and Beauty and the Beast,
Speaker 1: and this seemed to be a return to the company's
Speaker 1: former animation glory. Honestly, a lot of the work Katzenberg
Speaker 1: did set the stage for the Disney that we see today,
Speaker 1: a true month of a media company that owns, you know,
Speaker 1: practically everything. Katzenberg had a massive falling out with Eisner
Speaker 1: in the mid nineties. However, the third piece of the
Speaker 1: Eisner Katzenberg puzzle was a guy named Franklin G. Wells,
Speaker 1: and he had served as the president of the Walt
Speaker 1: Disney Company since nineteen eighty four, and he was kind
Speaker 1: of a balancing force. He brought sort of a harmony
Speaker 1: with Eisner and Katzenberg, and together they made great things happen.
Speaker 1: And he also didn't report to Eisner. Eisner was the
Speaker 1: company's CEO, but you know, Wells as president, actually didn't
Speaker 1: report to him. Instead, he reported directly to the board.
Speaker 1: But in ninety four, Wells died in a helicopter accident,
Speaker 1: and things became unbalanced at the company pretty quickly. Katzenberg
Speaker 1: wanted a bigger role at the company, and he felt
Speaker 1: that Eisner was blogging him at every turn, and then
Speaker 1: he was either fired or he resigned in nineteen ninety four.
Speaker 1: The story changes depending on who's telling it, but he
Speaker 1: was definitely bitter about the whole thing, like super bitter.
Speaker 1: Not long after he resigned, in a huff or was
Speaker 1: fired again, depending on who you believe. He founded a
Speaker 1: new company with Steven Spielberg and David Geffen called DreamWorks SKG. Spielberg, Katzenberg,
Speaker 1: Geffen get it, and it would be a new animation
Speaker 1: and live action film studio. Katzenberg was determined to repeat
Speaker 1: the success he had at Disney and then beat them
Speaker 1: at their own game. If you've seen the film Shrek,
Speaker 1: you will have seen some of Katzenberg's bitterness built right
Speaker 1: into the movie. The movie has a sequence in which
Speaker 1: the villain's plans for an amusement park that lampoons the
Speaker 1: Disney theme parks plays a role, and it was definitely
Speaker 1: a jab at Disney. Very mature anyway. DreamWorks produced several
Speaker 1: hit films, though I would argue they aren't quite the
Speaker 1: classics of the Disney Renaissance animated films, but that's a
Speaker 1: discussion for a totally different podcast. A decade later, DreamWorks
Speaker 1: spun off the animation division as its own subsidiary called,
Speaker 1: fittingly enough, DreamWorks Animation. Katzenberg was at the helm. Katzenberg
Speaker 1: was also an executive at the live action DreamWorks company
Speaker 1: at least until Paramount Pictures you know, Katzenberg's old employer
Speaker 1: purchased it in twentyd and six. In twenty fourteen, twenty
Speaker 1: years after he founded the original DreamWorks company, Katzenberg sold
Speaker 1: the animation studio to NBC Universal for three point eight
Speaker 1: billion dollars. Now Katzenberg was already extremely wealthy, but he
Speaker 1: took home a few hundred million from that sale, and
Speaker 1: then he jumped into his next venture. To do that,
Speaker 1: he first established a holding company in twenty seventeen called Wonderco.
Speaker 1: It's a WndrCo. Through this company, he could establish other
Speaker 1: ventures that you know, actually do things. Holding companies typically
Speaker 1: only exist to own other companies, and it all has
Speaker 1: to do with money and taxes and leadership, hierarchies and stuff.
Speaker 1: I don't want to go into it. Quibi would become
Speaker 1: one of the earliest ventures of this holding company, though
Speaker 1: at the time it had a different name, New TV.
Speaker 1: That was always intended to be something of a placeholder,
Speaker 1: and the idea was to create a video streaming service
Speaker 1: aimed at young adults who were increasingly relying on smartphones
Speaker 1: to access everything. The opportunity seemed fairly obvious create a
Speaker 1: service designed for smartphone users with short form content. Katzenberg
Speaker 1: would make sure that the content was studio level quality,
Speaker 1: with big names attached both to starin and direct or
Speaker 1: produce the shows, but the stories would be designed to
Speaker 1: play out in the time it takes to say wait
Speaker 1: in a line to order at Starbucks, or write a
Speaker 1: subway train or whatever. They would fill a niche that
Speaker 1: other services didn't quite hit. Stuff on Amazon or Hulu
Speaker 1: or Netflix was long form for the most part, requiring
Speaker 1: longer viewing times, and the short form stuff on services
Speaker 1: like YouTube tends to be a few or sometimes several
Speaker 1: steps below studio quality productions, so it seemed like a
Speaker 1: pretty solid bid. There were a lot of things Katzenberg
Speaker 1: was going to need to do to make this idea
Speaker 1: into a real business. He was going to need investment
Speaker 1: money to get the ball rolling, he was going to
Speaker 1: need someone to serve as the leader of the business,
Speaker 1: a CEO for the company, and he was going to
Speaker 1: need to establish agreements with studios and filmmakers to produce
Speaker 1: content for the service and advertisers to support it. So
Speaker 1: while new TV would spring up as an idea in
Speaker 1: twenty seventeen, it would take a little bit longer to
Speaker 1: become a reality. Now. One of those three tasks finding
Speaker 1: a leader, Katzenberg would check off in early twenty eighteen.
Speaker 1: Lead would be Meg Whitman, another famous entrepreneur in tech,
Speaker 1: so we need to hear a bit about her story
Speaker 1: as well. Whitman was born in nineteen fifty six in
Speaker 1: Long Island, New York, so we got a couple of
Speaker 1: New Yorkers here. She attended Princeton and Harvard. She earned
Speaker 1: a master's degree in business administration, and then she went
Speaker 1: to work for Procter and Gamble in the brand management
Speaker 1: division in nineteen seventy nine. She got married and relocated
Speaker 1: to California in nineteen eighty one and joined the consulting
Speaker 1: firm Bain and Company, where presumably she fought Batman. Wait,
Speaker 1: I'm I'm sorry, I'm being told this is a different bane.
Speaker 1: It's spelled differently in everything. Okay, that's my bad. In
Speaker 1: nineteen eighty nine, she became the senior vice president of
Speaker 1: marketing of consumer products over at the Walt Disney Company.
Speaker 1: So from eighty nine to ninety two she worked as
Speaker 1: an executive at the same company as Katzenberg, though they
Speaker 1: were in very diff diferent divisions of that company, Katzenberg
Speaker 1: over in the studio side and Whitman over on a
Speaker 1: strategic planning side. Whitman did say that part of her
Speaker 1: job was to keep people like Katzenberg contained inside a box,
Speaker 1: and Katzenberg hated that that was in an interview that
Speaker 1: they gave it south by Southwest in twenty nineteen. From
Speaker 1: ninety two to ninety eight, she worked as an executive
Speaker 1: or leader of a few different companies, including some that
Speaker 1: were difficult to manage. In nineteen ninety eight, a headhunter
Speaker 1: approached her about joining a new startup called eBay, and
Speaker 1: it took some convincing, but she eventually agreed to be
Speaker 1: the company's president and CEO. Now at that point when
Speaker 1: she joined, eBay had about thirty employees. By the time
Speaker 1: Whitman left the company in two thousand and eight, the
Speaker 1: number was closer to fifteen thousand. She had seen the
Speaker 1: company grow tremendously and kept it afloat even after the
Speaker 1: dot com bubble burst in two thousand and two thousand
Speaker 1: and one. Oh And also while at eBay, Whitman would
Speaker 1: join the board of directors of drum Roll Please dream Works,
Speaker 1: bringing her back along with Kabzenberg after retiring from eBay,
Speaker 1: Whitman turned her hand to politics. She ran for governor
Speaker 1: of California in two thousand and eight and spent millions
Speaker 1: of dollars, including an enormous amount of her own money,
Speaker 1: on her campaign. She actually broke the record for campaign
Speaker 1: spending in the United States. In the process. She got
Speaker 1: the Republican nomination for governor, but ultimately lost the election
Speaker 1: to Jerry Brown. In twenty eleven, she joined the Hewitt
Speaker 1: Packard board of directors and became the president and CEO
Speaker 1: of the company. Four years later, she was in charge
Speaker 1: when HP split into two separate companies. One of those
Speaker 1: was HP Incorporated, which encompassed the consumer products division like
Speaker 1: printers and computers, and the other was Hewitt Packard Enterprise,
Speaker 1: which is a business to business company offering products and
Speaker 1: services to corporate customers. Whitman made the move over to
Speaker 1: HP Enterprise and served as CEO until she announced her
Speaker 1: retirement in November twenty seventeen, although she wouldn't actually step
Speaker 1: down until the following February. In late January twenty eighteen,
Speaker 1: news broke that Meg Whitman would become the head of
Speaker 1: Katzenberg's new media company, then known as new TV, and
Speaker 1: she would also be the first official employee of that
Speaker 1: company and officially started work in March twenty eighteen. Katzenberg
Speaker 1: would serve as chairman of the board and a bit
Speaker 1: of a busy body. At that same time, news outlets
Speaker 1: were reporting that this fledgling startup had a pretty massive
Speaker 1: goal for raising investments to the tune of two billion
Speaker 1: with a b dollars a princely sum. We call startups
Speaker 1: that reach evaluation of a billion dollars unicorns. Katzenberg was
Speaker 1: looking to make new TV a unicorn right out of
Speaker 1: the gate, and this is probably something that I should
Speaker 1: cover for a second. Valuing a startup is a very
Speaker 1: tricky thing, largely because startups frequently can go months or
Speaker 1: years before having any real means of generating revenue, so
Speaker 1: they stay in business by raising investments over and over again.
Speaker 1: A brand new company may have nothing to sell, which
Speaker 1: means there's no way for money to come into the business,
Speaker 1: and the goal is to get to a point where
Speaker 1: you're either bringing in revenue, or more specifically, you're bringing
Speaker 1: in enough revenue to both cover all of your operating
Speaker 1: expenses and still have some leftover. You know what, we
Speaker 1: would call profits, But a lot of startups have no
Speaker 1: means of bringing in revenue right away. They may be
Speaker 1: based around an idea that is compelling and exciting and
Speaker 1: that could potentially bring in a lot of revenue down
Speaker 1: the line, but it will take time to execute upon that.
Speaker 1: In the meantime, the startups still have operating expenses. They
Speaker 1: have to pay employees and spend money on office space
Speaker 1: and stuff like that. So the challenge for a startup
Speaker 1: is to convince investors that the idea is solid and
Speaker 1: a money maker in the long run, and that the
Speaker 1: people in charge are capable of taking that idea and
Speaker 1: making it a reality. The investors can pour enough money
Speaker 1: into the startup to foot the bill for operating expenses,
Speaker 1: banking on the bet that this will pay off in
Speaker 1: the long run and that they will get a big
Speaker 1: return on their initial investment. Or they could just really
Speaker 1: hope that the company gets bought up by a larger
Speaker 1: entity and everyone gets a big payout just for coming
Speaker 1: up with a really cool idea. A media company in
Speaker 1: particular is a really expensive endeavor, especially one that's aimed
Speaker 1: at producing original and exclusive, highly produced content. So while
Speaker 1: two billion dollars is a truly enormous amount of money.
Speaker 1: It was also not exactly an unrealistic need. If New
Speaker 1: TV was going to launch a new streaming service with
Speaker 1: a broad variety of original programming, much of its studio
Speaker 1: quality production, and backed by known entities in the entertainment industry,
Speaker 1: it was going to cost a lot before the service
Speaker 1: ever became available for customers, and so Whitman and Katzenberg
Speaker 1: began to have a lot of meetings with potential investors,
Speaker 1: and those meetings paid off. I'll explain more after this
Speaker 1: short break. The temporary digs for new TV slash Quibi
Speaker 1: was in a shared working space in Los Angeles owned
Speaker 1: by Serendipity Labs. Coworking spaces are a topic that I
Speaker 1: should probably tackle at some point, though it's really only
Speaker 1: tangentially related to technology. It served as a base of
Speaker 1: operations for doing the legwork of getting investments and interviewing
Speaker 1: potential team members, and it was only temporary. Later on
Speaker 1: they would move into what has been described as lavishly
Speaker 1: decorated and expansive headquarters now according to Variety, by August
Speaker 1: twenty eighteen, the company had fewer than ten employees, and
Speaker 1: Meg Whitman said that she and Jeffrey Katzenberg spent half
Speaker 1: to three fourths of their time interviewing potential executives to
Speaker 1: join the group. While the streaming media landscape wasn't as
Speaker 1: ludicrously crowded in twenty eighteen as it is today, launching
Speaker 1: a brand new competitor at that time with original programming
Speaker 1: and no major established brand behind it like Disney or
Speaker 1: HBO was a pretty gutsy move. When Katzenberg and Whitman
Speaker 1: started looking for investors, I'm sure they frequently had to
Speaker 1: dismiss the argument that their service would have to compete
Speaker 1: against Netflix, Amazon Prime, Hulu, CBS All Access, YouTube, Premium,
Speaker 1: HBO Now, not to mention numerous other services. But their
Speaker 1: sales pitch was that this new service would really focus
Speaker 1: on the mobile market. The content would be made with
Speaker 1: smartphone users in mind from the beginning, not just in
Speaker 1: the length of content, but in the actual way it
Speaker 1: shows up on screen. It was going to be optimized
Speaker 1: for the mobile experience. As long as the content was
Speaker 1: good and the experience was compelling, they argued, it would work.
Speaker 1: It would scratch an itch that people had, even if
Speaker 1: they didn't know they had it, and it wouldn't require
Speaker 1: viewers to break up a movie or show into smaller chunks,
Speaker 1: because that had already been done for them. The content
Speaker 1: on the service would already be in those small chunks. Still,
Speaker 1: it had to be a tough sell. And heck, it's
Speaker 1: not like no one had ever tried something like this. Already,
Speaker 1: Verizon had spent more than a billion dollars launching a
Speaker 1: service called Go ninety. This service included original short form
Speaker 1: videos as well as licensed content from network television. The
Speaker 1: service was free to Verizon users, with the idea that
Speaker 1: advertisers would leap to be part of a service that
Speaker 1: was marketed to twenty five to thirty five year olds,
Speaker 1: and that's what would bring in revenue since these folks
Speaker 1: were spending more and more time on their phones. The
Speaker 1: only problem was it flopped. Verizon pulled the plug in
Speaker 1: the summer of twenty eighteen, and that I'm sure made
Speaker 1: Quibi's business case even harder to sell now if it
Speaker 1: weren't for the fact that you had the pairing of Katzenberg,
Speaker 1: who had spent his entire professional career in media and
Speaker 1: much of it in leadership positions, and Whitman, who had
Speaker 1: gained notoriety for taking a small internet startup into a
Speaker 1: publicly traded, enormous company. I don't think new TV would
Speaker 1: have received an enthusiastic reception among investors, but the pair's
Speaker 1: expertise and business acumen were undeniable, and the list of
Speaker 1: investors grew relatively quickly. That list included a lot of
Speaker 1: established media companies. In fact, all the major studios would
Speaker 1: become investors, so that included companies like Sony, Viacom, WarnerMedia, MGM, Lionsgate,
Speaker 1: and even Katzenberg's old target, Disney. In addition, there were
Speaker 1: other companies investing as well, such as Liberty Global and
Speaker 1: Ali Baba. All told, the first round of venture capital funding,
Speaker 1: which closed on July thirty first, twenty eighteen, raised around
Speaker 1: one billion dollars, pretty impressive for a business that had
Speaker 1: no product yet. In addition to that money, the holding
Speaker 1: company Wanderco, had secured seven hundred and fifty million dollars
Speaker 1: of its own Now, that was not just for new TV,
Speaker 1: though Variety reported that quote a good portion end quote
Speaker 1: of it was going into the venture. It wasn't quite
Speaker 1: two billion dollars, but my goodness, it was a lot
Speaker 1: of money. Wonderco would be quote a significant shareholder end quote,
Speaker 1: but not a majority shareholder in this company. Katzenberg was
Speaker 1: playing KOI with evaluation of New TV. He declined to
Speaker 1: disclose how the company was being valued, at least publicly.
Speaker 1: The biggest investor of the group was actually a firm
Speaker 1: called Madrone Capital, which was headed by the chairman of
Speaker 1: the Walmart chain of stores, Greg Penner. One decision the
Speaker 1: leaders made early on was that new TV was not
Speaker 1: going to produce content itself. Instead, it was going to
Speaker 1: partner with established entertainment producers and license programming from them.
Speaker 1: Through these licensing agreements, new TV would cover the costs
Speaker 1: of production plus some and it also meant that new
Speaker 1: TV would have a lot of different entities producing content
Speaker 1: for the platform that would help the company avoid having
Speaker 1: a production bottleneck. Katzenberg said in interviews that to have
Speaker 1: a successful launch, the service would need a lot of content,
Speaker 1: and not just a big quantity of it, but a
Speaker 1: variety of content as well. To appeal to a broad
Speaker 1: spectrum of audiences. Some folks might be big fans of action,
Speaker 1: while others prefer horror or comedy or and I hate
Speaker 1: to use this phrase, reality television. I'm something of a
Speaker 1: snob in that regard, not to mention, you know, I
Speaker 1: worked for a company that made reality television stuff, so
Speaker 1: I had a chance to see, you know how totally
Speaker 1: not real. It can get enough editorializing. Katzenberg also stated
Speaker 1: that the licensing deal they had in place was quote
Speaker 1: highly highly appealing into quote to entertainment studios. Now, I
Speaker 1: don't know any of the details of those deals, like
Speaker 1: whether or not there's an expiration on the license, meaning,
Speaker 1: you know, some content might eventually disappear off the platform.
Speaker 1: If you've got a Netflix subscription, you're probably familiar with
Speaker 1: this trend. Honestly, I'm still upset that the sketch show
Speaker 1: that Mitchell and weblook disappeared from US Netflix streaming. But anyway,
Speaker 1: Vulture reported that the deals typically included the cost of
Speaker 1: production plus another twenty percent, so that's not bad. Now.
Speaker 1: At this point, the venture was still called new TV,
Speaker 1: and the plan was to launch by the end of
Speaker 1: twenty nineteen. That would mean building out the infrastructure, building
Speaker 1: the app itself, securing the cloud services, or building them.
Speaker 1: But my guess is that Quibi relies on a major
Speaker 1: vendor to host the actual service, licensing all the content
Speaker 1: for launch, figuring out the marketing strategy, and getting those
Speaker 1: advertising deals in place. As for revenue, that was really
Speaker 1: something that Whitman and Katzenberg actually had concrete plans for,
Speaker 1: which is a nice change of pace with startups. Typically,
Speaker 1: when I do talk about startups, the details around how
Speaker 1: the company is actually going to make money get a
Speaker 1: little fuzzy. In fact, I suspect a lot of startup
Speaker 1: founders are just hoping that a bigger fish is going
Speaker 1: to come along and scoop up their company, buying it
Speaker 1: for a ridiculous amount of money, and then some bigger
Speaker 1: companies then saddled with a service that might not ever
Speaker 1: even generate revenue. But this was not one of those cases.
Speaker 1: From the start, the plan was to offer two tiers
Speaker 1: of subscription service. One would be an advertising light option,
Speaker 1: kind of similar to how Hulu operates, where the subscription
Speaker 1: fees would be subsidized by in app advertising. It would
Speaker 1: happen in between those short videos. The second option was
Speaker 1: to be an advertising free plan, in which subscribers would
Speaker 1: pay a little bit more but would be spared ads.
Speaker 1: Generally speaking, Whitman said her job was to focus on
Speaker 1: business strategy, well, Katzenberg would spend his efforts on securing content,
Speaker 1: and they must have been working pretty darn hard. Whitman
Speaker 1: told the press that new TV was merely a placeholder
Speaker 1: name and that they would soon announce a new official
Speaker 1: name for the service, and sure enough, in October twenty eighteen,
Speaker 1: the new name was launched. New TV officially became Quibi.
Speaker 1: Now the word quibi Quibi is a combination of the
Speaker 1: words quick and bite, because that's what the content on
Speaker 1: the service is all about, quick bites of content, whether
Speaker 1: it's drama or comedy or whatever. Around that same time,
Speaker 1: Katzenberg announced that filmmaker Guillema del Toro, who has made
Speaker 1: some truly phenomenal films that I adore, would be making
Speaker 1: some sort of zombie story. Sam Raimi, another filmmaker who's
Speaker 1: work I love, would be producing a horror anthology called
Speaker 1: Fifty States of Fright, about folklore and urban legends in
Speaker 1: the States of the United States. Jason Blum also had
Speaker 1: a project announced, so at least when it came to horror,
Speaker 1: Quibi was shaping up nicely. But while various productions may
Speaker 1: have begun, there wasn't anything to show off yet just
Speaker 1: the idea, which admittedly sounded pretty interesting. I mean, whenever
Speaker 1: anyone has more than a moment of nothing that's going on,
Speaker 1: they tend to whip out their phone. Creating content specifically
Speaker 1: to entertain people who do that sort of thing makes sense,
Speaker 1: and grabbing big names in entertainment would help raise Quibi's
Speaker 1: profile as well as act as a great draw for
Speaker 1: curious fans. At least that was the idea. In twenty nineteen,
Speaker 1: Whitman and Katzenberg were still making the rounds at various conferences,
Speaker 1: talking up the service and announcing new content partners and projects.
Speaker 1: At south By Southwest in twenty nineteen, Hey, you guys
Speaker 1: remember when we used to have south By Man. I
Speaker 1: feel awful for all the people who are counting on
Speaker 1: it this year. Anyway. At south By in twenty nineteen,
Speaker 1: Katzenberg and Whitman delivered a keynote about Quibbi and gave
Speaker 1: a little bit more information about their plans. At this keynote,
Speaker 1: Katzenberg made another case for Quibi, this time to consumers.
Speaker 1: He said that the analogy he liked was Dan Brown's
Speaker 1: novel The Da Vinji Code. Katzenberg said that that book
Speaker 1: is four hundred and sixty four pages long with one
Speaker 1: hundred and five chapters, which means it averages out to
Speaker 1: fewer than five pages per chapter. The result of this
Speaker 1: is that you could read a chapter in just a
Speaker 1: few minutes, and you could read as many or as
Speaker 1: few as you liked. You could put the book down,
Speaker 1: you could pick it back up later and just continue on.
Speaker 1: Brown structured the book so that the chapters were discrete
Speaker 1: units of story, with the end of one being almost
Speaker 1: like a cliffhanger for the beginning of the next one. Now, personally,
Speaker 1: I found this style to be exhausting. I hate it,
Speaker 1: But I'm in the minority here that the book was
Speaker 1: a massive hit, and I'm old. I mean, I feel
Speaker 1: the same way about Mulin Rouge. Can't stand the movie
Speaker 1: because the camera never stays on anything for more than
Speaker 1: a second. But then again, I'm old, So I'm not
Speaker 1: saying that this style is a bad thing. It's just
Speaker 1: not my thing. But maybe it's the thing that lots
Speaker 1: of young people like. That was the target audience anyway.
Speaker 1: Katzenberg said the goal of Quibi was to allow storytellers
Speaker 1: to craft content with that sort of short form in mind.
Speaker 1: The overall story could be very long, feature links or longer,
Speaker 1: but the chapters of the story would be ten minutes
Speaker 1: or less, with ad breaks in between them. The pair
Speaker 1: also revealed that the Quibi app would allow users to
Speaker 1: view videos either in portrait or in landscape mode, so
Speaker 1: either holding a phone vertically or horizontally, and in either
Speaker 1: case the movie would be full screen. Witman in particular
Speaker 1: mentioned that this experience was unlike other streaming services that
Speaker 1: work on mobile, with some stuck purely in one mode
Speaker 1: or the other and others creating a large amount of
Speaker 1: unused space when you go from landscape to portrait. Katzenberg
Speaker 1: also differentiated Quibi from YouTube. He pointed out that content
Speaker 1: creators can make videos for YouTube and make money off
Speaker 1: those videos, but the advertising model on YouTube means that
Speaker 1: as a creator, you have a limit of how much
Speaker 1: you can spend per minute. You can only spend up
Speaker 1: to three thousand dollars per minute, which that's already incredible
Speaker 1: to me, but after that you won't make enough money
Speaker 1: to cover the costs. And while that works great for
Speaker 1: someone who's making load to maybe mid level production videos,
Speaker 1: high end production stuff you know, like movies and television
Speaker 1: can cost upwards of one hundred thousand dollars per minute,
Speaker 1: and so he argued, Whibby has a place because it
Speaker 1: would allow for that kind of high production content that
Speaker 1: YouTube just can't support. Whitman added that the timing for
Speaker 1: Quibi was lining up with the rollout for five G networks,
Speaker 1: and just for a quick recap, five G is actually
Speaker 1: a general description for the next generation of wireless network technologies.
Speaker 1: There are actually many different flavors of five G. The
Speaker 1: relevant bit here is that these technologies will allow for
Speaker 1: much larger filesized transfers across a network at any given moment,
Speaker 1: so you can watch something like a high resolution video
Speaker 1: on a mobile device without having to worry about stuff
Speaker 1: like buffering. Now, there are a couple of things outside
Speaker 1: of Quibi's control that didn't really come up in these conferences. Sure,
Speaker 1: five G would be a great help to Quiby's use case,
Speaker 1: but then you also have to worry about stuff like
Speaker 1: battery life pulling down big files and playing high resolution video.
Speaker 1: Consumers a lot of battery power, and battery technology just
Speaker 1: doesn't evolve as quickly as some other technologies do, so
Speaker 1: that's a potential bottleneck, and another big one is data caps.
Speaker 1: If the company providing network service to your device places
Speaker 1: caps on how much data you can use in a month,
Speaker 1: and app designed to push big video files for you
Speaker 1: up to twenty minutes a day could end up being
Speaker 1: super expensive because of data overage fees. As for that
Speaker 1: twenty minute figure, Katzenbriggs said that was kind of their
Speaker 1: target to create a service where users would spend twenty
Speaker 1: of the seventy minutes a day on average that they
Speaker 1: would watch video on their phones. This time those twenty
Speaker 1: minutes would go to Quibi. Again, Quibi doesn't have control
Speaker 1: over this stuff, but then if they're going to talk
Speaker 1: about how five G is helping their case, I think
Speaker 1: they have to acknowledge how these other factors are challenges
Speaker 1: to overcome. Now, when we come back, I'll talk a
Speaker 1: bit more about the lead up to the launch and
Speaker 1: what has happened since, But first let's take another quick break.
Speaker 1: The content plan for Quibi was incredibly ambitious. The idea
Speaker 1: is for the service to launch a Lighthouse series every
Speaker 1: other week. A lighthouse series is a prestige story consisting
Speaker 1: of several chapters that collectively would make the story feature length.
Speaker 1: So every other Monday Quibi would launch a news series
Speaker 1: consisting of ten to fifteen chapters or so of episodes,
Speaker 1: each around ten minutes in length. In addition, the service
Speaker 1: has news shows that update daily, clip shows that show
Speaker 1: sports highlights, documentaries, reality TV shows, competition shows, entertainment news shows.
Speaker 1: The list goes on. Katzenberg said the service would launch
Speaker 1: one hundred new short videos on Quibi every week, so
Speaker 1: that means more than five thousand per year. In fact,
Speaker 1: for the first year, the idea was to release eight
Speaker 1: than five hundred Quibis. It's a truly enormous amount of content,
Speaker 1: so it's no wonder that the company was still seeking
Speaker 1: out an additional one billion dollars in funding in twenty nineteen,
Speaker 1: after having already secured more than a billion the year before.
Speaker 1: By the end of twenty nineteen, the streaming landscape had
Speaker 1: changed a great deal, and this was before the COVID
Speaker 1: nineteen crisis. Disney had launched Disney Plus, HBO Max was
Speaker 1: a new service on the way, Several other high profile
Speaker 1: services had either launched or announced an upcoming launch. A
Speaker 1: crowded streaming space was getting even more crowded, with each
Speaker 1: service competing for the entertainment dollars of consumers. The fact
Speaker 1: that Quibi was aiming purely for a smartphone viewing experience,
Speaker 1: rather than a service that was meant for televisions that
Speaker 1: could also be viewed on smartphones was a big differentiator,
Speaker 1: as was the price. In June twenty nineteen, at the
Speaker 1: produced By conference in California, Katzenberg and Whitman announced that
Speaker 1: Quibbi's ADS supported subscription would cost four dollars ninety nine
Speaker 1: cents per month. If you wanted to upgrade to the
Speaker 1: AD free experience, you could pay seven dollars ninety nine
Speaker 1: cents per month. Compared to other streaming services, this is
Speaker 1: on the low side, but not outrageously low. The standard
Speaker 1: package for Netflix is twelve dollars ninety nine cents a month.
Speaker 1: Hulu's basic plan with ADS is five ninety nine per month.
Speaker 1: Without ADS, it's eleven ninety nine. Amazon Prime, if you
Speaker 1: subscribe to it on its own, is eight ninety nine
Speaker 1: per month. Disney Plus is six ninety nine per month. Also,
Speaker 1: apologies for talking about all of this in terms of
Speaker 1: US dollars, but to go through all the variations and
Speaker 1: explain which services are available in various countries would that
Speaker 1: would be a really long and boring discussion, even for
Speaker 1: my show. Quibi continued the march toward launch, paying for
Speaker 1: a content production and negotiating ad deals, and along the
Speaker 1: way some early trouble signs started popping up. A few
Speaker 1: executives began to depart the company. One was a former
Speaker 1: Hulu executive named Tim Connolly, who was the head of
Speaker 1: Partnerships and advertising. He left in August twenty nineteen, and
Speaker 1: the company subsequently eliminated the position he had held. Another
Speaker 1: was jenis Men, formerly of The Hollywood Reporter, who had
Speaker 1: served as the head of Quibi's daily content you know,
Speaker 1: like news and the scuffle bolt was that Men had
Speaker 1: been having conflict with Katzenberg, who was particularly involved with content.
Speaker 1: There were rumblings that Whitman and Katzenburg had a bit
Speaker 1: of beef between each other on occasion, and rumors that
Speaker 1: Whitmen had even threatened to walk away from the business
Speaker 1: if Katzenberg didn't back off a bit. So the implication
Speaker 1: was that Katzenberg was really micromanaging and Witmen felt she
Speaker 1: wasn't being allowed to do her job. I don't know
Speaker 1: how true those rumors are, but whatever the case may be,
Speaker 1: Whitman stuck around. Connolly and Men would not be the
Speaker 1: only executives to leave Quibi, though the next one I'm
Speaker 1: going to mention didn't make tracks until after the service
Speaker 1: actually launched, so I'll get to that in a little bit.
Speaker 1: And I guess that's something. Quibi landed ad deals to
Speaker 1: the tune of a few hundred million dollars leading up
Speaker 1: to the launch, and the advertisers included really big names
Speaker 1: like Google, Walmart, Pepsi Co and more. Whitmen was instrumental
Speaker 1: in making those deals and the ad dollars would be
Speaker 1: there when the service, now scheduled to launch in April
Speaker 1: twenty twenty, would go live, so the stage was set.
Speaker 1: By late twenty nineteen, the company was banking on some
Speaker 1: hunches but didn't have much hard data to support them,
Speaker 1: and the initial idea was to only offer Quibi for smartphones.
Speaker 1: There was no intention to offer a version that would
Speaker 1: play on televisions or computers. And then we get to
Speaker 1: twenty twenty and the COVID nineteen outbreak. I don't have
Speaker 1: to tell any of you how disruptive the outbreak has been,
Speaker 1: particularly in the United States, where we see continuing trend
Speaker 1: of people behaving in irresponsible ways, and I apply that
Speaker 1: label to everyone, from citizens to politicians. COVID nineteen has
Speaker 1: changed just about every aspect of life, and it definitely
Speaker 1: changed how people are accessing entertainment. With more people staying home,
Speaker 1: there was less of a need to access stuff using
Speaker 1: a smartphone. I mean, we've got computers and TVs and
Speaker 1: game consoles and other stuff right there in front of us.
Speaker 1: I think a lot of us use phones because in
Speaker 1: our normal lives, that's the option that's open to us.
Speaker 1: We want stimulation and entertainment. We've got the phones with
Speaker 1: us all the time, So that's the solution to our
Speaker 1: perceived problem. In the olden days, you know, before smartphones,
Speaker 1: we had to wait until we were at some sort
Speaker 1: of connected screen, whether it was television that was connected
Speaker 1: to satellite or a cable or even over the air antenna,
Speaker 1: or a computer connected to the internet. Smartphone entertainment was
Speaker 1: sort of a matter of necessity once it was able
Speaker 1: to support it. Suddenly, Quibi's use case seemed less relevant.
Speaker 1: The nature of the game had changed dramatically and unpredictably,
Speaker 1: leaving Quibi's whole value proposition in question. The service launched
Speaker 1: on April sixth, twenty twenty, and it included a free
Speaker 1: ninety day trial with ads supported service. Not surprisingly, a
Speaker 1: lot of folks downloaded the app when it first launched,
Speaker 1: nearly three million within the first two weeks, but the
Speaker 1: real test was yet to come. For three months, people
Speaker 1: would be able to serf Quibi and check out content.
Speaker 1: Would that be enough to hook them so that they
Speaker 1: would pay for a subscription once the ninety days were up.
Speaker 1: There was definitely no sh shortage of content. There were
Speaker 1: tons of options with big name talent attached to them.
Speaker 1: Some of it was written specifically with Quibi in mind.
Speaker 1: Some were adaptations that tried to work within the confines
Speaker 1: of Quibi as best they could. And that's no small thing.
Speaker 1: Shaping a story so that it fits naturally in ten
Speaker 1: minute chunks requires a lot of work. Heck, I typically
Speaker 1: try and have the three big segments and tech stuff
Speaker 1: last approximately fifteen minutes each. And I never want to
Speaker 1: put an ad break in the middle of a thought
Speaker 1: or concept if I could possibly avoid it, and that
Speaker 1: can be tough. I imagine it's got to be a
Speaker 1: lot harder when you're presenting a long form story over
Speaker 1: the course of a series of short blasts of video.
Speaker 1: Before April was over, another top level executive left the company.
Speaker 1: This time it was Megan Imbras, who was head of
Speaker 1: brand and content marketing. In a departing email, she said
Speaker 1: that post launch was quote opportunity, time to transition end
Speaker 1: quote I imagine, So I bet it's getting pretty darn
Speaker 1: hard to land brand deals right now. The company saw
Speaker 1: the limitations of having the service only available on phones
Speaker 1: was going to be an issue in the stay at
Speaker 1: home world of COVID nineteen, so in May twenty twenty,
Speaker 1: they released a version of Quibi that works on Apple TV,
Speaker 1: and a little bit later they included the ability to
Speaker 1: send Quibi to a chrome Cast device, which allows people
Speaker 1: who have Chrome Cast to play Quibi on televisions. This
Speaker 1: was a quick pivot to try and course correct for
Speaker 1: a world that was drastically different than twenty nineteen, when
Speaker 1: the potential for the service seemed, you know, fairly relevant.
Speaker 1: In June, the Wall Street Journal ran apiece analyzing how
Speaker 1: Quibi was doing. The company had a goal of hitting
Speaker 1: seven point four million subscribers after the first year, so
Speaker 1: by April twenty twenty one. In other words, ording to
Speaker 1: the Wall Street Journal piece it was really on track
Speaker 1: to just hit two million subscribers, and this piece also
Speaker 1: went out before the three month free trial period had expired.
Speaker 1: App downloads had slowed after an initial spike following the launch,
Speaker 1: and the Journal also reported that the company expected it
Speaker 1: would need to raise another two hundred million dollars by
Speaker 1: the second half of twenty twenty one in order to
Speaker 1: keep things going, and that executives were also going to
Speaker 1: take a ten percent pay cut to help lower costs.
Speaker 1: In addition, COVID nineteen has thrown a monkey wrench on
Speaker 1: content production. It's a lot harder and riskier to produce
Speaker 1: Hollywood level television and film programming, and so that fire
Speaker 1: hose of content might be dribbling out before the end
Speaker 1: of twenty twenty. Things are not looking too good for
Speaker 1: Quibi right now. The bet on the service might ultimately
Speaker 1: go south. I actually downloaded Quibi for the purposes of
Speaker 1: this podcast, just to see what it's like to use.
Speaker 1: The feature allowing users to view videos in either portrait
Speaker 1: or landscape is called turnstile. I can confirm that it
Speaker 1: works in that you do get full screen with no
Speaker 1: black bars, no cropping, but if you're watching it in
Speaker 1: portrait mode vertically, then the app cuts off some of
Speaker 1: the stuff that's on either side of the frame. However,
Speaker 1: the idea was that filmmakers would take this into account
Speaker 1: when shooting the content. For Quibi, the process of shooting
Speaker 1: and editing would keep the most relevant stuff in frame
Speaker 1: when you are viewing it in portrait mode, and I
Speaker 1: think that's interesting from a filmmaking perspective. It means cinematographers
Speaker 1: and directors really have to think about the composition of
Speaker 1: their shots, filming them in both landscape and portrait, or
Speaker 1: editors have to make really tough choices when it comes
Speaker 1: to how they frame a sequence so that someone watching
Speaker 1: the program in a vertical orientation isn't going to miss
Speaker 1: out on something critical that's happening within the action of
Speaker 1: the story. I tried watching a couple of things. I
Speaker 1: haven't really found anything that really hooks me, though I
Speaker 1: have yet to watch an episode of Reno nine to
Speaker 1: one one, and I very much enjoyed that show when
Speaker 1: it was on its run on Comedy Central, so I
Speaker 1: will have to check that out. But I think part
Speaker 1: of the issue is that the ten minutes per segment
Speaker 1: thing is a real problem. I think creating very good
Speaker 1: short form stuff that linked together makes a compelling long
Speaker 1: form story is just hard. I think of it kind
Speaker 1: of like the general rule of fiction. The shorter the format,
Speaker 1: the more difficult it is to do well. So writing
Speaker 1: a good novel is hard, writing a good novella is harder.
Speaker 1: Writing a good short story is even harder than that,
Speaker 1: and writing a truly great short poem is extremely difficult.
Speaker 1: I think the same thing is holding true for video content,
Speaker 1: and it's why I've always felt that tech stuff should
Speaker 1: just be as long as the subject requires it to be.
Speaker 1: Will Quibi be able to survive its slow start, I
Speaker 1: don't know. I'm a little doubtful. I mean, it is
Speaker 1: an expensive endeavor. There are reports that advertisers already want
Speaker 1: to renegotiate in light of lower app download rates. I mean,
Speaker 1: why would you pay premiums for impressions you're not getting?
Speaker 1: The content production side is still pretty shaky with COVID
Speaker 1: nineteen going on. The user numbers aren't there yet, and
Speaker 1: now that we're out of the ninety day free trial,
Speaker 1: it's going to be really challenging to win an audience
Speaker 1: large enough to support the business. Gizmodo reported that more
Speaker 1: than ninety percent of users who enrolled in the free
Speaker 1: trial stopped once the trial ended. It may be that
Speaker 1: Quibi is sunk. Some folks think that was inevitable even
Speaker 1: without COVID nineteen. Now I don't know if that's true.
Speaker 1: I do think it was an ambition long shot, but
Speaker 1: I don't know that it was impossible. However, I do
Speaker 1: think the health crisis was an unforseeable obstacle that might
Speaker 1: just be too great for the company to overcome. To
Speaker 1: all the people out there who are working for Quibi,
Speaker 1: my heart goes out to you. For all the writers, actors, directors,
Speaker 1: and crew who are getting work because of Quibi, you know,
Speaker 1: people who had a chance to be part of something new.
Speaker 1: I feel for them too. It is really hard to
Speaker 1: get stuff produced and distributed. It's just really tough. Out
Speaker 1: of every film or TV show you see, there are
Speaker 1: hundreds that never get made. So I hate to see
Speaker 1: any venture like this fold, even if I don't think
Speaker 1: it worked all that well. As for Witmen and Katzenberg,
Speaker 1: they'll be fine. The investors, no, they'll be fine too.
Speaker 1: It'll sting a bit, but let's face it, they're wealthy too.
Speaker 1: They can handle a sour bet that's not going to
Speaker 1: break the bank for them. But for all the people
Speaker 1: who are the rank and file who are working for this,
Speaker 1: that's tough. And I really hope things turn around. I
Speaker 1: think it's a lot to ask for that to happen,
Speaker 1: and it's also a lot to ask consumers. It's getting
Speaker 1: increasingly difficult to convince people. Hey, you know you've got
Speaker 1: four or five subscription services going right now, how about
Speaker 1: you add this one to the list? And Whitman at
Speaker 1: south By Southwest said something interesting. She said that chances
Speaker 1: are we're going to see a pretty big increase in
Speaker 1: the number of streaming services in the short term, and
Speaker 1: then over time audiences will end up gravitating toward probably
Speaker 1: three or four of them, and the others will fade away.
Speaker 1: And the hope was that Quibi would be among that
Speaker 1: three to four. I think that hope is getting more
Speaker 1: and more unlikely as time goes on, but I hope
Speaker 1: that I am wrong. That's it for this episode. It's
Speaker 1: interesting to cover a company that has only really been
Speaker 1: live since April of twenty twenty and is already on
Speaker 1: very shaky ground. It was interesting to dive into the
Speaker 1: history here. If you guys have suggestions for topics I
Speaker 1: should cover in future episodes, whether it's a company, a technology,
Speaker 1: a trend in tech, anything like that, let me know.
Speaker 1: Reach out on Twitter to handle It's tech stuff HSW
Speaker 1: and I'll talk to you again really soon. Tech Stuff
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