ColdFusion - Quibi - The Netflix That Never Was.

Starting point is 00:00:01 Hi, welcome to another Cold Fusion video. In the last episode, we took a look at how Apple has started to move its production of iPhones out of China and towards India and how some of the new iPhone 12s will be made there. But today, we're going to be looking at the story of Quibi. How do you go from almost raising $2 billion for a new video platform, hiring a massive amount of A-list actors and creating a bunch of original content, only to just close down a six months, after launching. This is the story of Quibi, the Netflix that never was. It's also the story of how the differences in generations can affect the world of business. Let's take a look. You are watching Tull Fusion TV. Unlike most recent startups, the story of Quibi starts with the baby boomer. The platform was the brainchild of seasoned entertainment media mogul, Jeffrey Katzenberg.

Starting point is 00:01:03 The interesting thing about the Quibi story wasn't that Jeff didn't have the experience to lead a great company. In fact, it was the opposite. He was a management genius in the TV and movie industry. Kattenberg was born in 1950 in New York, coming from a well-off background being the son of a stockbroker and an artist. He would start his career at Paramount Pictures in the 1970s and quickly rose through the ranks. In 1984, he would move to Disney. Disney's motion picture division at the time was last in box office sales. But by 1987, Jeff thrust them to number one.

Starting point is 00:01:43 He would go on to oversee hit TV shows like The Golden Girls and Home Improvement. Jeff was only getting started though. When given the opportunity to revive Disney's flailing feature animation department, he oversaw films like Who Framed Roger Rabbit, Beauty and the Beast, Aladdin and the Lion King. Basically, he was great at his job, and whatever he touched turned to gold. Jeff would then use his professional insight to co-found DreamWorks in 1994 with Stephen Spielberg. Fast forward to 2018, and presumably, after seeing the success of both Netflix and mobile video consumption in all forms, Jeff saw an opportunity to carve out a market of his own.

Starting point is 00:02:28 The platform would be called Quibi, which stood for Quick Bytes, and it launched in April of 2020. Katzenberg would team up with former eBay CEO Meg Whitman to explore this vision. So, what did Quibi aim to do? In summary, it was Netflix for mobile. Short form, streamed video content around 7 to 10 minutes long, but for mobile only. Because of Jeff Katzenberg's previous achievements and contacts in the entertainment industry, he managed to attract big names such as Jennifer Lopez, Stephen Spielberg, Idris Elba, Dwighton. Wayne the Rock Johnson, Zach Ephron, Kevin Hart, LeBron James, Liam Hensworth, Chrissy Teigen, and the list goes on. NBC Universal, Sony, Viacom, Warner Media, J.P. Morgan, Ali Baba, Goldman, Goldman,

Starting point is 00:03:21 Goldman Sachs, and of course Disney threw money at the project to invest, $1.75 billion in total. The Quibi Company had a Super Bowl commercial before its launch, and would 50 shows available at launch, they were ready to take the world by storm. Our use case, which is now tried, through, tested and proven, the market is there. There are 2 billion people who are watching an hour of short form content on the go every day around the globe. If we go out and capture literally 2%, 3% of that addressable audience,

Starting point is 00:03:59 we will have one of the great blockbuster businesses of all times, Unlike TikTok or the general YouTube, the content was high production, slick and premium. There were three categories, reality TV shows, documentaries, or original movies that were delivered in 10-minute chapters. The core vision of the project was that users would watch these shows on a commute to a bus or train station. They were so confident on this core idea that there was no TV option at launch. I bet by now you can already see a few problems on. with this idea. Betting on mobile commuters made their target market specific and small. It was a huge risk at its core. For one, people could just watch Netflix or YouTube on the go. YouTube has

Starting point is 00:04:48 2 billion users and you can find whatever you want if you look hard enough. Quibi viewed their content as premium and they would be charging $5 a month for a subscription after a three-month trial. But there's already a lot of competition there. Disney Plus, HBO Max and Apple Tee. just to name a few. Users didn't need another one. But in Quibi's eyes, they had figured a gap in the market. There was no premium short form content for mobile. The theory is that people are going to be, are going to want to watch premium content, HBO level quality content on their phones instead of TV in addition to TV? In addition to it, if you're 25 to 30 years old, which is our core audience, you get up every

Starting point is 00:05:31 day, you leave your home and you take a television set with you. And between seven in the morning, and seven and night. Right now, today, you're watching 70 minutes, YouTube, Snapchat, Instagram, Facebook, watch in this. And it stuff's fantastic. We think we can bring Hollywood quality to that kind of consumption and bring a level of storytelling that the creators in that world had never been able to afford to do because they didn't have the resources. And in a subscription service, we actually can do it. And it's not dissimilar to what HBO did in the when they came along and said, we're not TV, we're HBO. And we would say to you, we're not short form, we're quibby.

Starting point is 00:06:12 They expected 7 million users in the first year and $250 million in subscriber revenue in that year. But this proved to be a massive miscalculation. By July, they had over 1 million active users, but only 72,000 people had signed up to pay. It was clear that the company was in trouble and needed to change and change fast. lockdowns had started to ramp up in their launch month of April, and people weren't commuting anywhere. In October, Quibi added support for TV. They released apps for Amazon Fire TV, Apple TV, and Android TV, as well as Apple Airplay and Google Chromecast. But it was too little, too late.

Starting point is 00:06:55 In just six months, the decision was made to pull the plug and the service was cancelled. Now, Katzenberg blamed the catastrophic failure on the coronavirus. But was this true? What went wrong for Quibby? Yeah, what went wrong, Alexis? I mean, what didn't go wrong? Now, if you ask Katzenberg and Whitman, it was the pandemic. And there was a sort of instantly viral, infamous interview he gave to the Times,

Starting point is 00:07:20 just over a month after Quibi launched in May, where he said, I blame every single problem we've had on coronavirus. But the problem with that thinking is it assumes that without the pandemic, this would have been a big hit. I'm not sure there's any evidence of that. Yes. This played a part, but platforms like TikTok are mobile only, and if anything, they thrived during the first round of lockdowns.

Starting point is 00:07:43 As we mentioned, going mobile first was a risk, but there's more to it. To begin, users couldn't organically share viral moments of video snippets. This is unlike TikTok, which has their brand logo at the bottom whenever something's shared, giving them free viral marketing. And on that note, the marketing of Quibi was subpar in general. I mean, how many of you have heard of people using Quibi? And how many of you didn't even know it existed? But it gets worse.

Starting point is 00:08:17 The biggest failure may have been the content itself. Although some reviews noted that there was good content on the platform, it may just be that traditional celebrities are falling out of favour, especially for mobile content. They're just not as big as they were 10 to 20 years ago. People no longer perceive them as genuine. Organically grown content is becoming king. Young people are no longer obsessed.

Starting point is 00:08:40 with the slick Hollywood media that a billion-dollar boomer startup could provide. Kube proves that you can't buy your way into what's perceived as cool. The newest generation finds its stars on TikTok, YouTube and Instagram. It's a crowd-led democracy on what's popular, and you can't buy that. To Jeff Katzenberg, this has never been the case in his professional career. In his heyday, TV, magazines, and even radio was king. In short, young millennials, and Gen Z just didn't care enough to pay $5 per month to see celebrities in short form content.

Starting point is 00:09:20 Jeff Katzenberg will return $300 million of the $1.7 billion raised and may liquidate assets. This is a contrast to firms such as WeWork and Theranos and allegedly Nicola Motors. He tried to keep the lie going as long as possible. So that's a plus for Jeff. Why did you decide to shut down Quibi now rather than at the first signs of problems with adoption or rather than wait and continue to try for longer. It was clear that for whatever reason, this was not going to be as successful as Jeffrey and I had hoped.

Starting point is 00:09:50 And so we took stock of where we were and we said the best thing to do, the honorable thing to do is to return money to shareholders when we knew this was not going to have a path forward as a viable standalone business. So we feel like we made the right decision, a very difficult decision, but the right one for shareholders.

Starting point is 00:10:09 So what can we learn here? Well, firstly, Quibi didn't understand their market or audience. Forcing mobile first, because it was your vision, is forcing the audience to come to you. It's probably better to always go to your audience if possible. Secondly, know how to deliver to the audience. Quibi had the money, but when they saw that the Hollywood crowd probably wasn't working,

Starting point is 00:10:31 they could have just looked to existing social media influences. It would have been cheaper and got at least some of the influencers' audience to join the platform. And lastly, lack of flexibility. could be postponed the launch or changed to a freemium model or changed from mobile only to TV much earlier. Though I have to say, like anything in this world, it's very easy to criticize, but much harder to build and create. Though it's interesting to wonder, what would you have done differently if you were in charge? I think we thought there would be easier adoption by people to it. I think that the environment that we found ourselves in, as you've heard us say many times, this was designed for on the go in between

Starting point is 00:11:19 at a moment of time in which no one was on the go, they're still not on the go. And so our product market fit was wrong. I mean, somewhere between the idea being less than perfect, which we own and the environment we found ourselves in is where the fail has come. What each of those are in that equation, I'm not sure any. of us are ever going to know, but it didn't work. But as I asked earlier, if you were in charge, what would you have done differently? You can discuss in the comments section below. For the past two episodes, I did say that the next one would be on Huawei.

Starting point is 00:12:01 The video's almost been finished for a while, but I've been having some conversations with some Huawei staff to get their side of the story. I wanted it to be a fair video that expresses both sides of the controversy, and this aspect of the back and forth conversations with Huawei is taking some time. But don't worry, the video is still coming. Anyway, that's about it from me. You've been watching Cold Fusion, and my name is Dogo. And I'll see you again soon for the next episode.

Starting point is 00:12:25 Cheers guys. Have a good one. Cold Fusion, it's new thinking.

ColdFusion - Quibi - The Netflix That Never Was.

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