Quibi was destined to fail.
I was sure of that when I first read the presser announcing the business plan.
There must be deep psychological reasons why retirement-age industry titans can even begin to fantasize about succeeding in mobile video — a medium that targets 10-20 yo’s with goofy dance videos shot in their Covid basement getaways.
And we could dig into Hollywood’s caste structure to explain why a collective investment of around $1.8 Billion in Quibi’s doomed model anticipates how the studio establishment is now getting whipped by Netflix.
A Deeper Takeaway
- Video platforms like Quibi that launch from a standing start face a high hurdle versus those that speed out of an existing online community.
- Twitch is a mobile video service that is building viewer engagement. (See chart)
- Twitch is now commissioning originals to target the user-generated video that built its audience.
- SNAP is also successfully adding originals to its UGV base.
- YouTube similarly evolved from UGV to launch an SVOD service that now commissions fully-budgeted documentary originals.
- How could Quibi, a pay-only service that Katzenberg loved to describe as ‘premium’ compete with FREE services that deliver the video that the target demo most enjoys?
What does Quibi’s failure say about Disney?
- Disney backed Quibi, but that loss is a blip compared with the Mouse’s bigger strategic challenges.
- Covid has smashed Disney’s theatrical movie and theme park businesses.
- The legacy channels, notably ESPN but including Nat Geo, are in decline.
- They are a distraction as Disney management struggles to shift to a content-focused streaming model based around Disney+.
- I’ll soon share more thoughts about how Nat Geo fits into this picture of a giant Mouse stuck for now in a glue trap.
- Just think of the impact of $1.8 Billion spent instead on projects addressing climate change or BLM!
- (Update: I leaned on Friday that Quibi retains a cash reserve of around $345 million.)
Quibi’s $1.8 Billion Fiasco: Founder blames coronavirus, not flawed business model
May 12, 2020
Quibi is a dud, as I predicted.
- Even with a free 90-day trial, the Quibi app has been installed by less than 3.5 million consumers.
- It ranks #125 among free iPhone app downloads.
- That’s behind Duolingo, the language app where I recently failed to learn much Swedish (“Hej, hej!”).
Founder and Hollywood mogul Jeffrey Katzenberg says in The New York Times (May 11): “I attribute everything that’s’ gone wrong to coronavirus.”
- My January 12 critique of the deep flaws in the business plan nearly hit the bullseye.
- I say ‘nearly’ because in January, Quibi’s investment was $1.4 Bn.
- Today’s estimate is $1.8 Billion!
Read my analysis below:
Quibi’s $1.4 Billion to Nowhere. Questions for a Hollywood / Silicon Valley Mobile Video Platform
(January 12, 2020)
Quibi’s announcements about its April launch reveal an over-capitalized plan that runs counter to the prevailing digital video business model.
- Quibi is the video streaming venture run by corporate heavies Meg Whitman (CEO) and Jeffrey Katzenberg (founder & chairman.)
- It is funded by studios led by Disney and Comcast/NBC/Universal, as well as China’s Alibaba and other players.
- Quibi committed $1 Billion to content, including documentaries and reality.
Following is my recap of the Quibi Plan and my Takeaways:
- Short-form content
- Formatted for mobile
- Delivered via a mobile app
- The great majority of the spend is for scripted programs provided by leading Hollywood talent.
- $5/mo for the ad-supported tier
- $8/mo for the ad-free tier.
- 50-60 shows at launch
- Up to 175 originals in Year 1.
- They include “movies told in chapters,” “episodic, unscripted and docs,” and “daily essentials.”
- The movie content is 7-10 minutes / clip
- Other genres: 5-6 mins / clip
- Quibi aims to launch 3 hours of content per day
- Most will be “daily essentials,” meaning mainly news and information.
- 18-34 year-olds
- “Turnstyle” lets users toggle seamlessly between portrait or landscape mode on their mobiles
- Jeffrey Katzenberg is a Hollywood corporate legend.
- He is imposing a Hollywood content framework on the TikTok generation.
- The heaviest mobile video users are kids who love goofy, “no-cost / low-cost” videos.
- They share them on Instagram, Snap, YouTube, Twitch, and recently via the TikTok phenomenon, and its 1.5 Bn app downloads.
- Quibi’s announced $7.5 Mn / cost-per-episode is a massive misspend for content that’s competing with a silly 15-second dance clip shot in a high school cafeteria.
Pricing: No “Free”
- Disney + captured up to 25 million subscribers after launch by offering a free trial subscription.
- Quibi’s Pay Only options don’t promote the sampling that can lead to engagement and subscription.
- (Quibi later offered a free option.)
- The Disney+ launch offer was heavily promoted on Disney’s channels, platforms and tourist destinations.
- Apple’s vast consumer customer base is a comparable rocket driving the launch of its direct-to-consumer service.
- Can Quibi afford to buy that scale of promotion that it needs to be competitive?
- Quibi’s announced target audience is 18-34 year-olds
- Industry analyst Will Richmond says: “That’s way too old. Quibi’s core target should be 13-20 year-olds, maybe even 10-20 year-olds. Smartphones are extensions of pre-teens’ and teens’ bodies; no other age groups are as attached. This is the mobile video generation!”
- Quibi’s $1.4 Bn seems like a lot to throw around.
- But if its natural audience is 12-20 year olds, Quibi will be waiting – and cashflowing – for a decade until the key demo has the disposable income to spend on a subscription service or appeal to advertisers.
- Lightning can strike, and its possible that Quibi will deliver a game-changing “House of Cards” or “Handmaid’s Tale” that defies the odds that I believe are stacked against the current plan.
MORE READING: Remember CBS Cable?
- Check out my earlier skeptical post covering the Katzenberg venture.
- I relate how Quibi’s business plan takes me back to the early days of Discovery.
- And the final days of CBS Cable.
- Don’t miss Will Richmond’s VideoNuze podcast “Will Quibi’s Big Bet on Mobile Video Pay Off?”
- Will and Colin Dixon discuss in detail Quibi’s content (“misaligned and too expensive”), pricing, demographic and technical challenges.
- And here again is The New York Times “Blame the pandemic” May 11 report