Commentary
The Tragedy Of Quibi
- by Ted McConnell , Featured Contributor, November 5, 2020
Sounds like Quibi, right?
But the current flood of explanations leaves us wanting. Indeed, what did those “people of importance” actually do wrong? Surely, blowing almost 2 billion bucks of other people's money in 18 months cannot be the result of something incidental. Rather, it must be something both fundamental and epic. Let’s start there.
First, CEO Meg Whitman seems to have put a grand vision before real consumer need. You’ve got to be damn sure of yourself to abandon fundamentals, but run around New York with a billion-dollar checkbook, and everyone will tell you how brilliant you are.
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Founder Jeffrey Katzenberg is noted for challenging bureaucracy and succeeding. This kind of attitude results in spectacular wins (and losses), but there is a difference between Quibi and the movie “Shrek,” his landmark producing success. That is, “Shrek” was a great story, amped up by slick tech. Quibi, by contrast, was an attempt to create a whole new kind of storytelling, and a channel to go with it: double jeopardy.
Quibi was built on the idea that consumers would want quality short-form video content on their phones, be willing pay for it with a subscription, and watch ads.
It seems simple. The product sucked. Nobody bought it. The company imploded. Spit, spat, spot.
But warnings were abundant.
At the time Quibi launched, consulting giants warned of “subscription fatigue.” Publishers were falling like troops at Normandy. Gaming and social apps were sucking up all the oxygen.
Quibi’s strategists may have thought they were competing for share of subscription dollars. More realistically, they were competing for attention across the entire spectrum of entertainment and information opportunities on mobile screens -- that is, all publishers. That’s a hardscrabble playground.
According to an article in The Atlantic, at about the time Quibi was launched, “so many media companies [had] reoriented their budgets around the production of videos that the so-called ‘pivot to video’ [had] become an industry joke. Today, the pivot seems less like a business strategy and more like end-of-life estate planning.” Apparently, pre-audience, Quibi principals thought they would just wade right in to the snake pit. Were they planning on clicking their heels together three times?
Of course, leadership was not operating in a vacuum. Most major studios were investors.
Here too, there was opportunity for trouble. Big collaborations among competitors are fraught with peril. Look at Epoch, the primordial mobile OS. Almost every phone maker invested in it. Ever heard of it? Big shots will join a syndicate simply based on FOMO, but if one party appears to be getting more than the rest, the entire scheme can unravel. Remember Apollo the measurement system? Kraft and Starbucks? McDonald's and Heinz? Nobody?
In the end though, lack of demand is what killed it. How could Quibi have foreseen that? The same way everyone else does: research.
With all that cash, and the sum of all content development companies, Quibi certainly had access to the best resources for research. It must have either been ignored, or been deeply flawed.
And don’t blame the pandemic. Netflix stock almost doubled between March and October this year.
Why didn’t one of the 10 brand customers, who collectively pre-committed to $150 million, just do the research? It would seem obvious to do a little consumer testing before going into something so speculative. It was, as a consumer play, in the sweet spot of all those advertisers. Still, it depended not on the popularity of a given bit of content, but on consumer behaviors changing. Advertisers should have known how to make that call.
And then there’s the basics of product development. Any qualified product person will drive toward value creation in small steps, each targeted at preventing overcommitting on an idea. “Fail small” is gospel. Were any of the precepts of Minimum Viable Product manifest in this mess? It’s like they missed an entire section in the bookstore.
And who paid? You did. In your Disney+ subscription, in the price of your deodorant, in your 401k valuation. And who will be held accountable for what amounts to a classic con -- selling hope -- without any real substance underneath the claim?
Whitman herself once said (regarding her stint at eBay) that “I should have listened to my intuition.” The tragedy is, that may be exactly what she did at Quibi.
The earlier one starts to "show" the new product to real consumers the better. Early consumer one-on-ones or groups would have been very helpful.
The most surprising part is that the self aggrandizing supposed adults in the room who contributed to this $2 billion dollar fiasco couldn't tell how bad this was from the get go. Just the names Whitman and Katzenburg in a concoction is a tell along with OPM sealed the horrid deal. If you have a bridge to sell, just build a phony idea and sell it to their investors. How far would $2 billion go for public education ?
Good one,Ted. A classic case of overconfidence and trying to dominate a venue---smartphones--without understanding what the venue is all about. As for the "advertisers", I doubt that they lost out as their contracts must have had provisions---I hope---for audience delivery guarantees. No viewers---no dollars.
With or without Quibi, there was, is, and will continue to be a ton of "quality short-form video content on their phones" for free.
I personally appreciate this transformation in the industry. As a media buff and self-proclaimed media historian, I'd say we are getting back to basics. Ads are intrusive and nobody appreciates having their viewing experience interrupted by messaging that usually does not address their needs. I love brand integrations and blatant transparency about brands and products supporting content and integrating with value vs. disruptions. That's how radio and TV programming originated.
Even YouTube hasn't figured out how to incorporate interruptions at the right time during programming and viewers are starting to push back. Why the investors in Quibi thought people would be willing to pay to have ads in order to watch short-form programming that is more than abundant for free is mind-boggling.
I haven't followed this tale of woe as closely as others have, but what strikes me is that they seem to have thought their competitive set was Netflix, Amazon Prime, and so on; "It's a streaming service but all short form!"
In reality, their competitive set was Snapchat and especially TikTok. Which are already serving the mobile, short form video market, and which are 100% free to users.
Seriously, spend a little time with TikTok. It's mesmerizing. An endless stream of short form videos; if you don't like this one, just swipe to the next. Or wait 20 seconds.
So who was Quibi for? The kid who thinks, you know, I don't have the attention span to binge a TV series, but I still wish I could pay for my videos?
Excellent column, T-Mac.
Paula Lynn, you are exactly correct. Past successes and brand name star power are two very powerful aphrodisiacs. But it It amazes me that VC's and investors put so much credence on this, instead of seeking out and investing in good ideas brought to them by unknown entities. There are so many good ideas out there waiting to be discovered but unfortunately for those that created them, they lack the connections and their shoulders don’t seem to be as attractive to rub, as those that rub shoulders with the elite.
Ted,
two points:
1) no common sense exhibited
2) Too often failures reflect too much love
of FOMO combined with no interest in FOMO
Fear Of FINDING Out what they don't want
to learn.
The more incredible point here is that these people were able to raise so much capital simply because of "celebrity" which does not mean they equate to success.
Meanwhile, pltforms and companies whom have proven themseleves and are growing have issues raising capital simply because of the lack of their network. Perhaps Jeffrey and Meg (or others like them as many may not soon again trust these two) can help companies that are proven, in hyper-growth mode but that require additional growth capital.