the streaming wars

Is Quibi Crazy Enough to Actually Work?

Quibi founder Jeffrey Katzenberg.
Quibi founder Jeffrey Katzenberg. Photo: ETIENNE LAURENT/EPA-EFE/Shutterstock

Type the words “will Quibi” into Google, and the third autocomplete suggestion is short and stark: Will Quibi fail? It’s a question that reflects the audacity of the basic proposition behind the just-launched mobile platform, which is that millions of consumers already overwhelmed with streaming options will pay $5 per month to stream premium, star-studded versions of the short-form content they already get delivered to their phones for free via YouTube and social media. Add in the fact that Quibi is debuting in the middle of a global pandemic, and there’s reason to share the skepticism of comedy writer Cullen Crawford, who last week tweeted that “Quibi is short for quixotic business idea.”

Quibi founder and Hollywood icon Jeffrey Katzenberg has heard from the haters and the naysayers, and he is not moved. The former Disney exec and DreamWorks co-founder knows his way around a sales pitch, and the one he makes for his latest venture is pretty simple: Quibi can work because there’s a long history of consumers paying for a better version of something they can get for free. Katzenberg points to how, as recently as the start of the last decade, the idea of consumers subscribing to a music plan rather than just downloading individual songs seemed ridiculous. “Yet there are now 187 million people who pay $10 a month for either Apple Music or Spotify,” he says. Similarly, before HBO helped usher in the cable revolution in the 1970s, the notion that a large number of consumers would ever pay for TV was deemed laughable.  “There was nothing wrong with broadcast TV. People loved it,” he explains. “But HBO did something that was highly differentiated, enough so that people felt it was worth paying a premium for. And that’s frankly what we are doing to the world of short form today. In the same way that they [said], ‘It’s not TV, it’s HBO,’ I would say, it’s not YouTube, Facebook, Instagram, Snapchat — it’s Quibi.”

Katzenberg, along with Quibi’s CEO, former Hewlett Packard chief Meg Whitman, have been making a variation of this argument to investors, talent, and advertisers for close to three years now, starting with a splashy story on the cover of Variety back in 2017. The hype and buzz-building for Quibi has been relentless, and at least so far, it seems to be working. The company has raised a stunning $1.75 billion in funding from a slew of Hollywood and tech firms, convincing almost all the major studios and entertainment conglomerates to invest in, and make programming for, the service. It’s been able to green light production on 175 programs featuring a slew of A-list talent — from Guillermo del Toro and Chance the Rapper to Laura Dern and Jennifer Lopez — in front of and behind the camera. Companies such as Google and Pepsi have already committed to $150 million in advertising for the platform. And it signed a deal with T-Mobile to make Quibi available for free to millions of its customers for at least a year.

But however successful Quibi’s pre-launch phase has been, none of it will matter if enough consumers don’t sign up for (and stay with) the platform over the next few years. That giant question mark hanging over the service has only grown larger since the COVID-19 pandemic blew up every part of society last month, making it even more difficult to predict how audiences will respond to Quibi. Katzenberg says he and Whitman obviously debated whether or not to delay the launch until the situation stabilized. They “looked at each one of the potential hurdles” of moving forward — distracted consumers, economic uncertainty, keeping Quibi’s daily news shows in production — as well as the possible business upside of the fact that people are locked in their houses looking for distractions from the drumbeat of awful news. It helped that Quibi had already completed production on about six months’ worth of programming, including shows whose post-production work is now being done remotely.

In the end, the execs decided things were too far along to delay the launch, and instead settled on expanding a planned two-week trial offer to a full three months for anyone who signs up for the ad-supported version of Quibi by April 30. “We tried to strike a balance in assessing those things, and I think have come to the right decision,” Katzenberg says of the extended trial offer. “I think the good will that hopefully we will get from making this available free to people is good from a brand standpoint.” Carter Pilcher, founder and CEO of the ShortsTV network, thinks his (kinda sorta) rival made the right call by supersizing its trial and moving forward with the planned launch date. “There is such interest and such pent-up demand for great short-form content, I think you will see enormous interest and maybe as many as 10 million subscribers who sign up in the first few months,” he says. “They will also benefit from everyone being at home. ShortsTV in the U.S. has seen an across-the-board increase in TV viewership since the pandemic began. I think Quibi is likely to benefit from a captive audience as well.”

Giving away Quibi for 90 days should allow sizable sampling of the service, but the bigger challenge will be turning shows into breakout successes via social media buzz and critical acclaim. To help build online heat, Quibi has crafted a production model designed to turn producers and stars into hype machines for their shows. Rather than buying rights to shows in perpetuity, Quibi is leasing programs and allowing producers (and in some cases talent) to repackage and sell them to other platforms at the end of a two-year exclusivity window. “They’re highly incentivized to market and promote their own content, as are the producers and the studios,” Katzenberg says. This may explain why, instead of just doing a press junket and booking a visit to Fallon, Quibi star Chrissy Teigen has been hyping Chrissy’s Court to her 12.5 million Twitter follower for months, including a recent stunt in which she spent most of a day settling minor squabbles online.

In its quest for hits, Quibi is also stealing a page out of the Netflix playbook by overwhelming consumers with choices, pushing out what will likely be a dozen or more new programs every month during the first year. That won’t guarantee the platform will find its House of Cards or Marvelous Mrs. Maisel right out of the gate, but it ups the odds a number of those shows will end up as niche hits with passionate fan bases. “They’re launching with a serious amount of content, and there’s something for everything in their slate,” says Rich Greenfield, a media analyst with LightShed Partners, who has previewed about three hours’ worth of Quibi originals. Unlike past attempts to target mobile-centric audiences with short-form content (R.I.P. Go90), or even Snapchat’s current roster of originals, Greenfield says Quibi fare comes closer to what you’d find on traditional TV or streaming. “If you look at a show like Survive or the Farrelly Brothers show The Now, you’re not finding premium content like that online in short form,” he says. “And if the content is good enough, $5 per month doesn’t seem like a crazy price.”

One senior partner at a leading Hollywood talent agency says he and his team came away impressed by a recent content preview Quibi held for the company. “They actually came here with special phones and showed us a bunch of their shows, and it went over really, really well,” he says. “People liked the shows, they liked the output. They sat in silence for 40 minutes watching.” Agents aren’t Quibi’s target audience, of course, and this source has a conflict of interest: Like virtually any significant Hollywood figure, he’s known Katzenberg for years. Still, agents tend to be brutally honest about projects they think are doomed to failure, particularly when talking on background to reporters. It’s not insignificant that at least one big agency is cautiously optimistic about Quibi’s prospects.

While Quibi will have a wide variety of programs across multiple scripted and unscripted genres, its demographic target is relatively narrow: Katzenberg says he’s making shows for adults under 45 but with a specific focus on “a 25-to-35-year-old, multicultural, diverse millennial audience.” Not coincidentally, that’s one of the age groups most appealing to advertisers; Quibi is clearly going where the (ad) money is. But having such a tight focus could limit subscription revenues, particularly in an economic downturn where younger consumers are most likely to feel the pinch of high unemployment and lost wages. And Katzenberg leaves no doubt how he and his investors will measure success. “It will be in net paid subscribers,” he says. “That’s the only thing that matters. There is no other metric.”

Katzenberg declined to say how many subscribers Quibi needs to attract in order to be a success, and was vague when asked to project what the number will be at the end of the platform’s first year. (“A pretty good amount, I think you should expect,” he said, responding with a firm “no” when asked if he wanted to get more specific.) Katzenberg did make it clear that Quibi was not planning to bleed money for years and years the way Netflix and other streaming platforms have done. “We are a private company and we obviously have responsibilities to our investors,” he says. “From day one, this business was designed so that our revenues are meant to exceed our expenses. That is our fundamental business belief and model. This was built to be a profitable business. It’s not meant to just build an audience.” With something in the neighborhood of $1 billion spent on content in the first year, Greenfield and Pilcher both estimate Quibi needs about 20 million subscribers in order to work. “Quibi at 20 million subscribers looks relatively healthy,” Greenfield explains. “It doesn’t need 100 million to be successful.”

Quibi might even be able to survive with a lower subscriber tally if it decides to cut back on its programming budget after year one. A key reason it’s making so many different kinds of shows is because it doesn’t really know yet what the audience for premium short-form content is, or exactly what that audience wants to watch. Netflix greenlit House of Cards as its first original based on insights gleaned from its movie-streaming business; Quibi is basically winging it. “Everything up until now is driven by instinct and experience and knowledge of the content team and myself,” Katzenberg says. “What we are all very, very excited about is to actually see what [audiences] gravitate to. I have my favorites, the things that I love, but I don’t count anymore. What we look like in year one versus what we look like in year two will be guided very much by our customers.” And while Quibi will most likely continue making as many programs in the years ahead, Katzenberg is leaving the door open a crack for the possibility he’ll have to cut back on spending. “We obviously are starting with a very, very ambitious schedule of original content,” he says. “Right now, we anticipate that the cadence of content and production would be the same in year two as it is year one, with a very big ‘but,’ and the ‘but’ is: What are our customers telling us?”

Quibi skeptics think the service will have no choice but to slash budgets if it can’t quickly amass a big subscriber base. “If everything doesn’t pan out exactly as they project, they’re going to struggle to downshift their business model to one that doesn’t consume so much cash,” ShortsTV’s Pilcher says. And as much as Hollywood insiders generally respect and admire Katzenberg, it’s common to hear those same insiders wonder whether there really is a substantial number of consumers willing to pay for short-form mobile content, even if it is a premium experience superior to anything currently in the market. Quibi shows may be end up being great, but the service is launching in the middle of a dramatic expansion of premium streaming offerings: Disney+ and Apple TV+ debuted last year, while HBO Max, Peacock, and a new offering from ViacomCBS are rolling out this year. Those platforms aren’t designed for mobile, but they’re still competing for eyeballs and dollars.

Katzenberg says he is aware of the doubters; he understands why some question whether he and Whitman can succeed. But he believes Quibi fits into a rare category of projects on which he has worked, namely those where “the finished project turns out better than I hoped or imagined when we set out to do it.”

“I’m confident that that’s going to work. Why? Because I have to say, at least up until now, I’ve never been in a position where something that is really good failed. It hasn’t happened,” he says. “So those who today have uncertainty or skepticism, they have every right to — because until it happens, it hasn’t happened. But I have lived my entire career surrounded by that ‘show me,’ ‘prove to me,’ ‘I’ll believe it when I see it,’ ‘I don’t think so,’ ‘really?’ Those are words I’ve lived my whole life, my whole career. I don’t ignore them. I’m not pretending they don’t exist. I hear them. I understand them. I just don’t agree with them.”

Is Quibi Crazy Enough to Actually Work?