Front Burner - Quibi: Why the $2 billion video app is failing

Episode Date: June 18, 2020

In the midst of a pandemic, two veteran executives launched Quibi — a video-streaming app intended for watching on the go. With nearly $2 billion in cash invested and a huge roster of A-list celebrities creating content, it seemed like a recipe for success. But two months later, the app has largely missed the mark, with subscriptions way below expectations. Today on Front Burner, we talk to Kathryn VanArendonk, staff writer for New York magazine, to find out why Quibi is failing.

In the Dragon's Den, a simple pitch can lead to a life-changing connection. Watch new episodes of Dragon's Den free on CBC Gem. Brought to you in part by National Angel Capital Organization, empowering Canada's entrepreneurs through angel investment and industry connections. This is a CBC Podcast. Hi, I'm Josh Bloch. Do you know about Quibi? Maybe you've seen ads on Twitter or Instagram.

Or maybe you or someone you know has subscribed, though I'd be less certain about that. Quibi is a new mobile-only streaming app that offers Hollywood-quality short videos. It was launched with a mind-blowing amount of money, big-name stars, and CEOs. Just a Quibi. Mr. Chance. The rapper. Mr. The rapper.

I'll be out in a Quibi, Kendall. And things are not going well for Quibi. The money's almost gone, the audience has not turned up, and that's not all. Today, what happened to Quibi, and why? This is Frontburner. Joining me now is Catherine Van Arendonk. She's a staff writer for New York Magazine and Vulture.com. Catherine, hello. Thanks for joining us.

Thanks so much for having me. I want to start with the name Quibi. It's short for quick bites. How does that stack up? How does that name stack up against other names like Netflix and Snapchat, TikTok, Hulu? Like what's in a name? You know, every company has a goofy name that was unfamiliar to us. And we accept that. My issue with quibi and i think um one of the things that that i i probably shouldn't judge it on but i can't get out of my head is that when it was quibi i was like okay it's another one of these names it doesn't mean anything to me but i maybe it will just become one of those words that in five years sounds completely normal right except

then they explained that it was Quick Bytes. Is that what it stands for? Quibi is Quick Bytes. Quibi is an app that you can watch on your phone. With tons of awesome original shows. And then as soon as I knew there was an explanation for this silly word, it just felt like this wildly over-engineered thing. And I couldn't get out. To me, it just immediately sounded like it was a kiosk in an airport where you're going to buy a very underwhelming sandwich, you know?

And I've never been able to move on. Well, I understand that the original name was actually supposed to be something completely different and maybe not any better. No. So there was a Wall Street Journal report that came out recently that is about the relationship between Quibi's two founders. And one of the details in that was that it was originally going to be called Omakase, the small bite sushi meal for people who can afford to have really lovely small bite sushi meals. And I felt, I mean, that name is so much worse, but also somehow like truer to what they were imagining this would be. Everything I learned about Quibi, I just, I am amazed anew.

Well, I want to ask you about what Quibi is supposed to be. I mean, what actually is the problem that Quibi is trying to solve? Yeah, so there are these chunks of time throughout the day where we are watching video on our phones. We tend to be watching it in the context of like stuff that we scroll across on social media, on your Twitter feed, on your Facebook. And almost everyone watches video on their phone in a vertical format, right? And you just have huge black bars above and below the video that you're watching. And very little of what you're watching is actually made to play on a phone.

So Quibi's idea was, what if we actually made an app that was designed to create video that was for your phone and everyone who is making all of that video knew that that would be the context that people were going to be watching in it. So you could watch it in vertical. They also made it so that you could watch it in horizontal and

you could like switch back and forth. The videos are meant to be short so that if you're watching it, say, while you're commuting or if you are sort of in between meetings, if you're waiting for an Uber, these sort of little moments in time throughout your day when everyone's fiddling with their phones already. What if you had bespoke video to fill in those little moments? Beautiful full screen images like you've never seen before from world renowned creators with a fresh perspective on how to storytell on a small screen. So that was really the initial conception of Quibi. So that was really the initial conception of Quibi. And they then got this huge stable of entertainers to create content for that platform.

From Academy Award winner Pete Farrelly comes a comedy starring Dave Franco and Bill Murray. Kiefer Sutherland and Boyd Holbrook are starring in The Fugitive, and it's a brand new take. And so when they launched, there was this sense of like, okay, this could be a completely different way to watch video. They could be inventing something interesting and new here.

And I think that was the hope. Quibi is the brainchild of these two veteran executives. So you have Jeffrey Katzenberg and Meg Whitman. And Katzenberg, of course, is known for his role at Disney, and he produced major animated films like The Little Mermaid and Aladdin. And it's not dissimilar to what HBO did in the 1990s 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 Quibi. And you have Meg Whitman, who was a former head of eBay and Hewlett-Packard.

I have this little mental model of great consumer tech businesses. First is, are the trends, the wind at your back, are the trends right? The trends are dead on here. What did that signal, do you think, to investors about the potential of this app? They were very successful in signaling how confident they were in this idea. And I think the two of them together felt like this perfect lineup of the exact kinds of people that could make something like this. You want somebody with entertainment experience, somebody who knows the business and who has a sense of what people actually want to be watching. And then you also have somebody with the experience of launching, you know, a new tech company and getting people to change their behaviors around

the technology that they're using and understanding what's going to be appealing to investors and how to make UI work and all of the sort of technical stuff that is crucial if an app like this is actually going to be appealing for a lot of people. And they were able to raise an incredible amount of money. I mean, I think. Almost like one point eight billion dollars. Yes. Yes. Which I it's hard to imagine how exactly all of that money got spent as quickly as it did but um the reporting

at least in the wall street journal and in some other places is that they have been burning through cash very very rapidly and um they will be out of that original 1.8 billion by the like by this fall and if they want to continue through next summer, they are going to have to fundraise again. Well, presumably one of the ways they have been spending this cash is pulling in these major stars. I mean, the list is remarkable. Jennifer Lopez, LeBron James, Idris Elba, Steven Spielberg, Chrissy Teigen.

I mean, it goes on and on in terms of these kind of A-list celebrities that they've brought in to create and produce content for the app. Ten grateful celebrities will each be giving away $100,000. I didn't know how to create a school, but let's figure it out. Let's learn together. The people are real. The cases are real. And the judgments are legally binding. This is Chrissy's Court. judgments are legally binding. This is Chrissy's Court. Absolutely. And they also are doing a lot of have made a lot of deals with pre-existing, particularly for their like newsy shows, pre-existing titles. So they have like a 60 Minutes show. Stories that raise questions about our society, about race, about power. We're going to take you there so you can be

part of that experience. There are also, you know, licensing agreements that they must be spending quite a lot of money on. Between those and the fact that they had to sort of make all of this content from scratch because they wanted to launch with a significant library of stuff. Yes, that is where a lot of the money has gone, But they also are a huge company. They have, even still, even after executives have started slowly leaving, they still have about 250 employees. So it's a significant outlay of cash for them. Well, so I want to ask you about the actual rollout of Quibi. I think one of the decisions that skeptics and critics have keyed in on was that the content is only available on the app on your phone.

So you can't, initially, you haven't been able to cast it onto a television, you can't take a screenshot of it. I mean, you can't really share it. What kind of impact has that had in terms of the success of the rollout? You know, it is incredibly annoying. And I think it has been a bigger element in Quibi's underwhelming performance than Quibi itself might have imagined particularly because a lot of the content is not that great and some of the most interesting stuff is also the goofiest and I am very aware of how powerful it is to have somebody say, like, have you seen this ridiculous thing?

Like, that is a great way to get people interested in this thing that you are trying to advertise. And there was, in fact, this one clip of a Quibi show that did go semi-viral. it was a clip from a horror show by sam ramey again big name called 50 states of fright and it stars rachel brosnahan and the premise is that uh her arm gets cut off and her husband makes her a golden arm. The tests have come in. It is pulmonary gold disease. As long as your body keeps absorbing the gold through your skin,

there's very little I can do. You've got to take off that prosthetic. No. And it is so silly and over the top and stilted and everything about it feels incredibly awkward. and everything about it feels incredibly awkward. And there was a clip that somebody took using one phone to record the different phone playing this Quibi episode of Rachel Brosnahan saying, When I die, bury me with my golden arm.

If I die, bury me with my golden arm. Great viral... I saw this and the people shooting the video are kind of giggling frequently in the background. Yes, great viral stupid content. Could have been a pretty good driver for them, because I know a lot of people like to watch a train wreck, right? And then maybe if they come for the train wreck, they stay for other stuff that may actually be more interesting to them or that they would actually like. If you can't share screenshots, if you can't make this a thing that people are talking about with each other, you're never going to be able to build that kind of audience appreciation for these

sorts of things. Because also when people like things, they like to make more content about it. That's what you want. And so Quibi really, by making that something that was very hard to do, I think that was an unexpected problem for them. You know, I downloaded the app and took a look at it and I was impressed. You know, it looks really slick. And obviously there's a whole range of content there, things like The Golden Arm. But there's also a show called 60 in 6, which features this Pulitzer Prize winning correspondent, Wesley Lowry, and it looks really good. The content was impressive.

Among the first people we came across at the memorial was Tyrone Carter, a former NFL player for the Minnesota Vikings. The reason why I'm so hurt? Because Minnesota got an ugly truth I need to let you know about. Yeah, look, there are some things on Quibi This is why I'm so hurt, because Minnesota got an ugly truth I need to let you know about. Yeah. Look, there are some things on Quibi that I am I'm completely sold by. That is one of them. I am actually oddly fond of a very strange comedy show called Nikki Fresh starring Nicole Richie. I'm looking for music that only I can make.

Starring Nicole Richie. I'm looking for music that only I can make. Where she plays a sort of half parody version of herself as a trap artist who is making music for like hipster moms who like organic foods. And it's like a goofy, strange. Music for everybody. Teachers, rabbis, burgos, but mostly moms and gays. And Lionel Richie shows up and like calls her ridiculous. I mean, this is the sort of thing that I would love to be able to that, you know, you could imagine a conversation about. I have to say, though, in almost every one of these cases, as you watch these shows, even the good ones, you can feel the ghost of what they want to be still while you are watching them in reduced Quibi form. What do you mean? So the fact that it feels kind of ephemeral is all right because it is today's news. But the fictional shows, you don't want them to feel ephemeral. You don't want them to feel like this little light, trivial thing.

You want people to like them and care about them and maybe come back to them and you can't talk about them with anyone else gives them this odd airlessness like they like you watch it and then it's just you can't even remember the experience of watching it like oh right i i did actually spend quite a bit of time watching nikki fresh but but i never talked about it with anyone again. I can't take any screenshots of it. And it was in these tiny little chunks that it was like it was making fun of itself for how short it was. So it sort of doesn't stick in your head at all. Right. When I commuted once upon a time before the pandemic, you know, you would see people watching like segmented versions of late night television or news bites or, you know, funny videos or whatever. Not I was rare that I was sort of see someone watching Netflix on on a subway.

I think the content that they were making, it almost didn't matter how good it was. It was always going to be completely useless in the way that people actually use their phones. But I also think the content, if you're aiming for a group of people who are on their phones all the time and who maybe don't want to be watching Netflix, probably you should be aiming for more like a Gen Z, younger millennial audience. And the content that they're making, some of it is for that. But a lot of it is much more for like, I'm 35. Clearly, the shows that they are making are with a user like me or even older in mind. And I just doubt that that was ever going to be a group that was suddenly going to be thrilled about only watching videos on their phone. In the Dragon's Den, a simple pitch can lead to a life-changing connection.

Watch new episodes of Dragon's Den free on CBC Gem. Brought to you in part by National Angel Capital Organization, empowering Canada's entrepreneurs through angel investment and industry connections. Hi, it's Ramit Sethi here. You may have seen my money show on Netflix. I've been talking about money for 20 years. I've talked to millions of people and I have some startling numbers to share with you. Did you know that of the people I speak to, 50% of them do not know their own household income? That's not a typo, 50%. That's because

money is confusing. In my new book and podcast, Money for Couples, I help you and your partner create a financial vision together. To listen to this podcast, just search for Money for Couples. I help you and your partner create a financial vision together. To listen to this podcast, just search for Money for Couples. Well, I want to ask you about the launch. It costs $5 a month to be a subscriber to Quibi, and that's $5 a month with ads, $8 without ads. They've been running a 14-day free trial. How have subscriptions gone?

Not great. Really not great. Jeffrey, hit me with some metrics. Hit me with some metrics. What do we got? How many people have downloaded so far? More than 3 million. And certainly in a couple-a-week period of time to do that is pretty, pretty phenomenal.

Yeah, the current pace is fewer than two million paying subscribers in its first year, which is paltry. Although keep in mind here, the target that Quibi had set was seven million. When it was first launched, it was right when most of North America was starting to grapple with coronavirus. And so suddenly, nobody is actually leaving their houses. Nobody is doing this kind of commuting behavior that Quibi was designed to be watched during. And so Katzenberg and Whitman, there were some quotes that were floating around where it was like, well, part of the problem with Quibi's launch is that it is this pandemic and we could not have foreseen this coming. And so part of the reason nobody's watching it is that it was designed for a behavior

that doesn't exist anymore. Was there ever a point when you guys second guessed yourselves about the launch? Oh, yeah. Like crazy. I can kind of understand that. Except in this most recent report, what they said was that they are continuing to having problems with subscriptions, not because of coronavirus, but because of the sudden wave of global protests for Black Lives Matter. And after the death of George Floyd, they feel uncomfortable promoting Quibi. So that's actually why they have subscription problems. Right.

Well, in an interview with the New York Times, initially Katzenberg had said, I attribute everything that has gone wrong to the coronavirus, everything. Yes, everything. Meanwhile, now the problem is Black Lives Matter. And at some point you have to wonder, could Quibi have only been successful in their minds

if nothing in the world was happening? So what are you going to be looking for next with Quibi? What do you anticipate will be their next move? Look, at this point, it does feel pretty hard to turn the ship around. But I don't think it's impossible yet. They raised $1.8 billion. So even though they have spent a ton of it, they still have money left in the bank. They could do two things. They could hang on long enough based on the fact that they actually have new content still coming out when a lot of TV and movies do not. And then after that, they could add some kind of like shareable social element to the app.

They could enable screenshotting, which I think is going to be difficult because it's a it's a for them. It's a copyright licensing problem. But for them, I would I would may I would tell them that it's a it's a for them it's a copyright licensing problem but if for them i would i would may i would tell them that it is a priority um i would also look they got all of these big entertainment names to sign on to make a kind of thing that didn't really exist yet like the idea of what a quibi show is was something everyone was just trying to imagine without having any models and And so it is possible that you could now go in as a as a creative, you know, some a director, a producer, watch a lot of could be stuff and say, Oh, I can now see what I think works, and what I think

doesn't work. And I could imagine how to improve it. And then instead of just flying blind, you are actually basing your creative decisions on on models of success and failure in the past and thus could get better, right? Like you could imagine people looking at what already exists and trying to improve on it and then actually making something interesting. interesting creative person who was like seeing this as an opportunity. I feel like I would probably wait for the next company that tries this rather than signing on to the Titanic of this. It's difficult to be the first. Yeah. Yeah. Catherine, thank you so much for your thoughts on this. It is my pleasure. And just before I let you go today, some news to get you caught up on. NDP leader Jagmeet Singh was kicked out of the House of Commons on Wednesday

after calling a Bloc Québécois MP racist. Does the Honourable Member for Burnaby South have the unanimous consent of the House of Commons on Wednesday after calling a Bloc Québécois MP racist. Does the Honourable Member for Burnaby South have the unanimous consent of the House to move the motion? Yes. Agreed? No. Oh, I'm sorry. This exchange happened after an NDP motion

on systemic racism in the RCMP failed to receive unanimous consent. Singh refused to withdraw his comments or to apologize to Bloc member Alain Therrien and was asked to leave for the remainder of the day. That MP not only say no, but make eye contact with me and just kind of brush his hand, dismiss it. And in that moment, I got angry. I'll be honest, I got angry. But I'm sad now. Because why can't we act? And after a long campaign by Prime Minister Trudeau,

Canada has lost its bid for a seat on the UN Security Council. This marks the second consecutive time Canada tried to lobby for a spot. Ireland and Norway won the election for the two available non-permanent seats. I'm Josh Bloch. See you tomorrow. For more CBC Podcasts, go to cbc.ca slash podcasts.