The Quibi Era Begins: Will It Last?

Sam Blake

Sam primarily covers entertainment and media for dot.LA. Previously he was Marjorie Deane Fellow at The Economist, where he wrote for the business and finance sections of the print edition. He has also worked at the XPRIZE Foundation, U.S. Government Accountability Office, KCRW, and MLB Advanced Media (now Disney Streaming Services). He holds an MBA from UCLA Anderson, an MPP from UCLA Luskin and a BA in History from University of Michigan. Email him at samblake@dot.LA and find him on Twitter @hisamblake

The Quibi Era Begins: Will It Last?

Five years after its conception and 18 months after development kicked off, Quibi launches today in the U.S. and Canada. Much has changed since founder and chairman Jeffrey Katzenberg first pitched CEO-to-be Meg Whitman over dinner on his vision of the next generation of content innovation.

Some changes have boosted the short-form, mobile-only video platform. Whitman, whose Silicon Valley track record is widely viewed as an ideal yin to the yang of Katzenberg's in Hollywood, likes to point out that mobile video usage increased from six minutes a day on average in 2012 to 60 minutes in 2018. Such trends, alongside their respective rolodexes and credibility, surely helped Quibi to raise $1.75 billion over two rounds.


Other developments augur less optimistically. Competition has intensified. And of course, there's the coronavirus crisis, which among other consequences forced Quibi to cancel its glitzy launch event.

One thing that appears to be business as usual, though, according to Quibi Chief Product Officer Tom Conrad, is how the company will measure success: net paid subscribers.

Quibi has been quiet on its customer projections. But Laura Martin, senior analyst at investment banking and asset management firm Needham & Company, told dot.LA one way she would analyze Quibi's goals is to consider its potential exit opportunities.

"They've already invested $1.75 billion," she said. "So they'd need to get at least a $2 billion valuation. At a 10x revenue valuation, they'd have to get $200 million in revenue. What does it take to get there?"

Though she didn't proffer a crystal ball, dot.LA did some back of the envelope math.

It will take 2.9 million annual subscribers to secure $200 million in revenue, given the subscription prices of $4.99/month with ads and $7.99/month without, and using Whitman's stated assumption that 75% of customers will opt for the cheaper option.

This does not account for the $150 million of ad inventory that Quibi has already sold, which covers the entirety of its first year.

"Until we know more about the $150 million terms and conditions, we can't know how much we can count toward a normalized annual revenue," noted Martin.

So we'll take 2.9 million as the number for now. How can Quibi get there?

To enchant subscribers, it will rely on providing them a differentiated product.

"Our ambition is to elevate the mobile viewing experience," noted Chief Technology Officer Rob Post.

Quibi: Coming To A Phone Near You April 6www.youtube.com

One way it will do so is through technology. Quibi's nifty Turnstyle feature allows users to watch content in either portrait or landscape mode. Creators and advertisers reportedly embraced the technology, which works by delivering users two simultaneous streams -- one for each mode -- along with a single audio track, Post explained. (Turnstyle is the subject of an ongoing litigation dispute involving Israeli firm Eko, which claims Quibi has infringed its patent; Quibi denies wrongdoing.)

Quibi has also been trumpeting its After Dark technology. Though not available at launch, it will supposedly allow Steven Spielberg's upcoming project to appear on people's phones only at certain times of day.

As important as Quibi's tech, if not more so, is its content. With plans to release 8,500 episodes (all 10 minutes or less) across 175 shows in year one, it debuts today with 50 shows. Five are movies-in-chapters; the first three episodes of each are now available, with new episodes meant to roll in every weekday, presumably until the story's conclusion. There are also eight documentary series, 12 unscripted shows, and 25 five-to-six-minute daily updates spanning news, weather, wellness, sports and culture.

Quibi plans to release new titles on a weekly cadence. 25 new episodes will appear each day, the company says, comprising over three hours of original content. The talent that Quibi has enlisted, in front of the camera and behind, promises top-notch production value.

Its partnership with T-Mobile will help drive customers, too (though these promotionally incentivized subscribers will contribute less to Quibi's bottom line). And, in the short term, so will its 90-day free trial for anyone who signs up in April.

But will it be enough to stand out?

Quibi's competition is fierce. Most directly it is fighting other mobile-oriented viewing platforms, particularly YouTube, Snapchat, Instagram and Facebook. But, with its production spend, it aims to stand out from such rivals. "We're staking out a premium position," Whitman has said.

Then there are other video options, including traditional TV and film, plus the increasingly numerous streaming platforms, including Netflix, Hulu, Amazon, and soon-to-arrive HBO Max and NBC's Peacock. (Not to mention video games, and so on.)

Before coronavirus, Quibi leadership could more credibly claim that it is not directly competing with these players. The company had staked out a position that would target people's "on-the-go" moments, between 7am and 7pm as Whitman has often said. It was not conceived to compete with the "prime time" offerings that folks tend to watch on their bigger screens.

Image courtesy of Quibi

So how does the coronavirus change things?

The data and opinion here are mixed.

On one hand, customers may be hungry for content as lockdowns have injected free time into their lives. Streaming video climbed 27% in the third week of March compared to the previous two, according to Conviva, a research outfit. Daytime viewing shot up 40%.

News, in particular, is capturing people's attention, with 42% of people saying they're watching it more than before the outbreak, according to Magid, another research firm. That could bode well for Quibi given its daily update heft.

Magid also reported viewership is up on Netflix (27%) over the same period, along with live broadcast TV (20%), cable TV (18%), Hulu (14%) and Disney+ (13%). Mobile phone usage is up, as well. AT&T has reported a 39% increase in call volume, while T-Mobile has noted an 85% increase in video gaming on its devices. Snapchat has reported that viewing of its mobile-first shows on its Discover platform is also up.

The question for Quibi is whether these trends will prove complementary or competitive.

Martin thinks the former, given that Quibi's marketing will likely reach more eyeballs. "They're probably going to get more awareness and probably more adoption," she said.

Ross Benes of eMarketer concurs. "Although Quibi's premise is that you can watch it on the go, streaming services have a more captive audience right now than they probably ever will. People will still be messing around on their phones while they're stuck at home. I suspect that will lead to an increase in how many people test Quibi."

On the other hand, coronavirus has not been kind to all media. In particular, content that people tend to consume in transit is not doing so well. Podcast downloads and audiences were down in each of the final three weeks of March, according to Podtrac. Reports have also suggested that music streaming has not seen much uptick.

"The problem," says media analyst Bruce Leichtman, "is that, not only in lockdown, most people are streaming on television sets. Netflix is close to 90% on a TV set, same with (Amazon) Prime, same with Hulu."

Image courtesy of Quibi

As people hunker down together, it also may hurt Quibi that, unlike Netflix for example, only one user can stream per account. "Hypothetically they've found a market niche," Leichtman summarized. "The next hurdle is, will I pay for it?"

In other words, while the next 90 days will be important for Quibi to build momentum, the following period is what will determine its success.

"Quibi will have to get people used to paying for short form video," noted Benes, "which isn't a common consumer behavior at the moment."

So what's their biggest vulnerability? "Limiting their product to one device when everyone else is expanding the devices they're on," answered Benes.

Though Katzenberg has held firm that Quibi is meant to be mobile-only, his top staff wouldn't entirely rule it out.

"One of the things that Rob and I," Post said, "and Meg and Jeffrey are all really excited about is getting the product out into the world so we can move from this experience of an intuition-driven organization to a data- and experimentation-driven organization."

"If there's appetite for Quibi in the living room or on tablets," he added, "we certainly will follow that interest as the data reveals that that's a place we can be."

As to whether the coronavirus hurts its value proposition, Quibi's company line is that those "in-between" moments it had been targeting before are still there, just different.

"I think now more than ever the use case is still there," said Conrad. "We'll see."

----

Sam Blake covers entertainment and media for dot.LA. Find him on Twitter @hisamblake and email him at samblake@dot.LA

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🏰 Disney's Epic Investment Stands Out Amidst Gaming Industry Layoffs

Christian Hetrick

Christian Hetrick is dot.LA's Entertainment Tech Reporter. He was formerly a business reporter for the Philadelphia Inquirer and reported on New Jersey politics for the Observer and the Press of Atlantic City.

🔦 Spotlight

In the midst of widespread gaming industry layoffs, a glimmer of positive news emerges as Disney announces a significant move: a $1.5 billion investment in Epic Games. 🏰💰🐭

Image Source: Disney

Disney's $1.5 billion investment in Epic Games, disclosed late Wednesday, signals a strategic alignment aimed at expanding the success of "Fortnite." The deal enhances Epic's growth prospects after financial setbacks, including layoffs, and strengthens the partnership between the two companies. With Disney gaining a larger equity stake in Epic, the collaboration will broaden the integration of beloved Disney franchises like Marvel, Star Wars, Pixar, and Avatar into the game, potentially boosting its appeal and longevity. This significant investment underscores Disney's commitment to interactive entertainment and signifies a shift towards games as a primary revenue stream, aligning with the growing trend of digital engagement among younger demographics. Moreover, the potential for crossover sales of physical Disney products within "Fortnite" and the exploration of new content distribution channels are just some of the opportunities arising from this partnership.

For LA tech, the Disney-Epic Games partnership represents a validation of the region's burgeoning tech and gaming ecosystem. The substantial investment in Epic, who maintains a large Los Angeles office with 1,000+ employees (according to LinkedIn), reflects confidence in the LA’s talent pool and innovation potential. Additionally, this partnership between two industry giants fosters an environment for further collaboration, investment, and growth within LA's tech sector. As Disney and Epic Games deepen their ties and explore new avenues for content integration and distribution, it not only elevates the prominence of LA as a tech hub but also stimulates economic growth and job creation in the region. This partnership highlights LA's unique position as a hub where technology and entertainment converge. With its ability to integrate diverse industries, LA is driving innovation and expansion in digital entertainment. 🚀💸🎮

🤝 Venture Deals

LA Companies

  • ProducePay, a financing and marketplace platform for the fresh produce market, raised a $38M Series D led by Syngenta Group Ventures joined by Commonfund, Highgate Private Equity, G2 Venture Partners, Anterra Capital, Astanor Ventures, Endeavor8, Avenue Venture Opportunities, Avenue Sustainable Solutions, and Red Bear Angels. - learn more
  • Blush, an invite-only dating app that drives users to local businesses on dates, raised a $7M Seed Round from individuals like Naval Ravikant. - learn more
  • Mogul, a startup founded last year that provides an overview of an artist's royalty earnings and identifies areas where money is owed but has not yet been collected, raised a $1.9 million seed round from Wonder Ventures, United Talent Agency, AmplifyLA, and Creator Partners. - learn more
  • Avnos, a hybrid direct air capture startup, raised a $36M Series A led by NextEra Energy and joined by Safran Corporate Ventures, Shell Ventures, Envisioning Partners, and Rusheen Capital Management. - learn more
  • AI.fashion, startup whose mission is to help retailers enhance the online shopping experience by providing consumers with virtual try-ons and personalized fashion recommendations, raised a $3.6M Seed Round led by Neo. - learn more
  • Suma Wealth, startup that aims to demystify financial topics and provide culturally relevant content, virtual experiences, and resources to help Latino users navigate financial challenges and opportunities, raised a $2.2M Seed Round . Radicle Impact led, and was joined by Vamos Ventures, OVO fund and the American Heart Association Impact Fund. - learn more
  • 222, a startup that helps users discover their city and meet new people through unique social experiences, raised a $2.5M Seed Round. Investors included 1517 Fund, General Catalyst, Best Nights VC, Scrum Ventures, and Upfront Ventures. - learn more
  • LimaCharlie, a security operations cloud platform, raised a $10.2M Series A led by Sands Capital. - learn more
  • Polycam, an app that uses a smartphone’s sensors to capture 3D scans of objects, raised an $18M Series A co-led by Left Lane Capital and Adjacent, and joined by Adobe Ventures and individuals like Chad Hurley and Shaun Maguire. -learn more.

LA Venture Funds

Actively Raising

  • ReelCall, Inc., an entertainment technology company focused on powerful apps and platforms that help build and maintain the professional network of connections vital to career growth, is raising a $850K Pre-Seed Round. - learn more
  • CZero, a startup building software to decarbonize logistics for logistics businesses and goods business through a vetted marketplace and optimization software. - learn more
  • Couri, a technology startup addressing last-mile delivery issues, is raising a $450K Pre-Seed Round at a $2.2M post money valuation. - learn more
  • Sweetie, a marketplace to help people plan date nights, is raising a $1.5M Pre Seed Round. - learn more
  • StartupStarter, an investment platform that provides real-time data and analytics on startups, is raising an $850K Angel Round. - learn more

If you’re a founder raising money in Los Angeles, give us a shout, and we’d love to include you in the newsletter!

Venture Waves, Climate Tech Wins, and Silicon Beach's Ongoing Evolution

Christian Hetrick

Christian Hetrick is dot.LA's Entertainment Tech Reporter. He was formerly a business reporter for the Philadelphia Inquirer and reported on New Jersey politics for the Observer and the Press of Atlantic City.

Anduril Seeks $1.5B in VC Funds

Defense company Anduril Industries Inc., based in Costa Mesa and founded by Palmer Luckey, is seeking to raise $1.5 billion in fresh funds to boost its valuation to $12.5 billion or more, according to sources quoted by The Information. This fundraising effort, if successful, would mark one of the largest venture capital rounds of the year.

Image Source: Anduril

Anduril recently secured a contract to develop and test small unmanned fighter jet prototypes under the Air Force’s Collaborative Combat Aircraft (CCA) program, beating out major defense companies like Boeing, Lockheed Martin, and Northrop Grumman. Alongside General Atomics, Anduril will design, manufacture, and test these aircraft, with a final multibillion-dollar production decision expected in fiscal year 2026. This program aims to deliver at least 1,000 combat aircraft to fly in concert with manned platforms and is part of the Air Force’s Next Generation Air Dominance initiative. Central to Anduril’s success in this contract is the Fury autonomous air vehicle, acquired through the purchase of Blue Force Technologies. This victory underscores Anduril's rapid advancement in the defense sector, aligning with Luckey's vision of building faster and more cost-effective defense assets. - learn more

Los Angeles Ranks Number 1 in Emerging Climate Tech Hub

The 2024 Emerging Climate Tech Hubs Report by Revolution highlights Los Angeles as a burgeoning center for climate tech innovation. LA's growth in this sector is driven by its diverse talent pool, strong research institutions, and a culture of environmental consciousness. The city's unique mix of legacy industries, such as entertainment and aerospace, alongside emerging tech companies, positions it as a pivotal player in the climate tech landscape. This shift reflects a broader trend of decentralized climate tech funding across the U.S., reducing the historical dominance of California's traditional hubs. - learn more

Silicon Beach: Looking Back, Moving Forward

Assessing the overall health of the startup market is challenging, especially as venture capital funding has decreased by an average of 61% from 2021 to 2023 across the top VC markets in the US. Markets with robust ecosystems in AI, SaaS, Biotech, Healthtech, and Fintech appear to be weathering the downturn better than those focused on Consumer and Gaming industries, areas where Los Angeles traditionally excels.

Percent Change In VC Funding By Region

CB Insights

LA Times paints a rather bleak outlook on the Los Angeles tech scene noting venture capital funding in Greater Los Angeles plummeted 73% from 2021 to 2022. Silicon Beach, once a vibrant tech corridor, currently faces high vacancy rates and lacks late-stage financiers, especially in the AI sector. However, there are positive signs, including growth in aerospace startups and increased venture capital investment in early 2024, suggesting a potential rebound for LA's tech ecosystem.

While LA may not be exceeding expectations during this period, its tech ecosystem warrants a nuanced evaluation, given the broader market dynamics and its strong performance in specific sectors. Reach out to us with your thoughts.

🚀 SpaceX gears up for another stellar year, active raises, and more

Christian Hetrick

Christian Hetrick is dot.LA's Entertainment Tech Reporter. He was formerly a business reporter for the Philadelphia Inquirer and reported on New Jersey politics for the Observer and the Press of Atlantic City.

Happy Friday Los Angeles! You made it through the first week of 2024!

🔦 Spotlight

Elon Musk may be a divisive (albeit entertaining) figure, but the continued success of SpaceX is pivotal for the aerospace industry in Los Angeles and more broadly around the world.

Image Source: SpaceX webcast

What happened with SpaceX in 2023?

  • Elon Musk challenged Facebook founder, Mark Zuckerberg to a cage fight.
  • SpaceX launched 96 successful missions with its Falcon series of rockets, a 57% increase over its previous annual record.
  • SpaceX conducted two test flights of the largest and most powerful rocket ever built, Starship.
  • Roughly two-thirds of SpaceX's launches in 2023 were devoted to building out Starlink, the company's satellite-internet megaconstellation.
  • Isaacson’s Elon Musk biography was published in September including everything from Musk’s tumultuous relationship with his father to his work ethic and “demon mode”.

Moving forward what can we expect from SpaceX and its controversial founder? Continued innovation pushing the aerospace industry to new limits? Yes. More drama? Without a doubt.

Here is some of what is to come in 2024:

🤝 Venture Deals

Just Announced

Check back next week!

LA Exits

  • CG Oncology, an Irvine, CA-based developer of immunotherapies for bladder cancer, filed for a $100M IPO. It plans to list on the Nasdaq (CGON) with Morgan Stanley as left lead underwriter, and has raised around $317m in VC funding. - learn more
  • McNally Capital agreed to sell Advanced Micro Instruments, a Costa Mesa, CA-based maker of gas analyzers and sensing technologies, to Enpro (NYSE: NPO). - learn more

Actively Raising

  • ReelCall, Inc., an entertainment technology company focused on powerful apps and platforms that help build and maintain the professional network of connections vital to career growth, is raising a $850K Pre-Seed Round. - learn more
  • CZero, a hard-tech startup that is developing a technology for decarbonizing natural gas, is raising a $1.5M Seed Round. - learn more
  • Couri, a technology startup addressing last-mile delivery issues, is raising a $450K Pre-Seed Round at a $2.2M post money valuation. - learn more
  • Sweetie, a marketplace to help people plan date nights, is raising a $250K Angel Round. - learn more
  • StartupStarter, an investment platform that provides real-time data and analytics on startups, is raising an $850K Angel Round. - learn more

If you’re a founder raising money in Los Angeles, give us a shout, and we’d love to include you in the newsletter!

📅 LA Tech Calendar

Sunday, January 7th

Wednesday, January 10th

  • Startup Cafe: Networking with a Kick - Entrepreneurs, Startups, and Tech Enthusiasts join together to meet and connect with like-minded people, industry professionals and investors, while enjoying a nice cup of coffee in Venice at The KINN. This week’s interactive discussion about AI’s evolution in entertainment will feature Dr. Sam Khoze and Rachel Joy Victor.
  • Venice Tech Happy Hour- Join Startup Coil and FoundrHaus Wednesday evening and enjoy the sunset from the rooftop, grab a bite overlooking Abbot Kinney, and mingle with other tech enthusiasts and entrepreneurs by the bar on the patio.

Have an awesome event coming up? Reach out to be featured on next week’s Newsletter!

📙 What We’re Reading

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