When Meg Whitman spoke to dot.LA in April, the Quibi CEO struck a tone of cool patience. "I'm very focused on 'where are we after a year?'," she said. Ultimately, Whitman never got that perspective. Quibi shut down less than seven months after its launch.
The high-flying, $1.75 billion mobile streaming service attracted investors from Hollywood studios to Goldman Sachs and is now grappling with how to return whatever capital it has left. Meanwhile, investors and those inside the company are asking how it all happened.
<p>"I think they gave up pretty quickly," said Anis Uzzaman, general partner and CEO of Pegasus Tech Ventures, which invested $35 million into Quibi. "And if it was this quick, they should have left more money on the table."</p><p>Analysts began picking apart the Hollywood-based mega startup long before its problems became apparent, as the company's <a href="https://www.theverge.com/2020/1/8/21056315/quibi-ces-2020-launch-meg-whitman-jeffrey-katzenberg-turnstyle-technology-shows-preview" rel="noopener noreferrer" target="_blank">self-assured messaging</a> and <a href="https://www.wsj.com/articles/streamer-quibi-raises-additional-funds-ahead-of-launch-11583267901" rel="noopener noreferrer" target="_blank">enormous fundraising</a> seemed to invite criticism.</p><p>Those criticisms included the company's miscalculation of its target demographic's preferences, its <a href="https://dot.la/ficto-raise-2646273511.html" target="_self">lack of social media functionality</a> and interactivity, and that it misaligned incentives with its A-list content creators, who had <a href="https://techcrunch.com/2020/06/23/what-went-wrong-with-quibi/" rel="noopener noreferrer" target="_blank">little reason</a> to provide the unproven app their best work. Then there was the pandemic, which – <a href="https://www.nytimes.com/2020/05/11/business/media/jeffrey-katzenberg-quibi-coronavirus.html?smid=tw-share" rel="noopener noreferrer" target="_blank">as founder and president Jeffrey Katzenberg emphasized </a>– limited the on-the-go moments in consumers' lives that Quibi was targeting. </p><p>We'll never know what Quibi could have been if not for the coronavirus. Through conversations with a former Quibi employee, a Quibi investor and an entertainment analyst, however, we've picked up some insights on what it could mean for entertainment startups, venture capital and the future of mobile content. </p><h2>Generational Disconnect
</h2><p>An ex-Quibi marketing employee, who spoke to dot.LA on condition of anonymity due to a non-disparagement agreement he signed, shed some light on how Quibi's issues looked from the inside. </p><p>One problem he saw was the disconnect between Quibi's leadership and its target demographic, which the company stated was broadly 18-44 year-olds, and more specifically 25-35 year-old millennials. </p><p>Although Katzenberg had an undeniably strong entertainment background, and Whitman brought leadership experience from atop the tech world, both were generations removed from their targeted audience. </p><p>"Especially from an age perspective, not understanding our target demographic's consumption habits and use of social media was absolutely something that hurt Quibi," the ex-employee said. "If we had leaders that were more in tune with general social media trends, habits, usage, they'd probably have a different perspective to the importance of having a platform that has a social media aspect to it." </p><h2>Lack of Startup Savvy
</h2><p>Pegasus Tech Ventures' Uzzaman told dot.LA that, in retrospect, it would have been helpful if both founders had had startup experience. Katzenberg had some, he noted, but Whitman came from the corporate world. Uzzaman had hoped their experiences would be complementary, but he now thinks Whitman's lack of startup experience harmed the company. </p><p>"When you're a startup founder, you need to be very patient and try different things. I would have expected more of that in this case," Uzzaman told dot.LA, noting that startup problems are different from those faced by a big-company CEO.</p><p>The ex-employee said inexperience among some of Quibi's leaders limited the company's flexibility and productivity.</p><p>"There's only so far being a great business person can take you in an industry where you need expertise in both entertainment and technology and having experience of running a fast-paced startup; it's completely different from running a company like eBay or HP," he said. </p><p>"A lot of times we'd need to reframe ideas and analyses in a way that someone [less experienced] would be able to understand as opposed to someone else well-versed in the concepts, who would have been more productive in working through some of these questions or issues."</p><p>One such issue: Quibi's Super Bowl ad and Oscar's campaign had little impact in raising brand awareness and familiarity with its product. The former marketing employee said the company was slow, even reluctant, to respond to those failures. </p><p>"There was an opportunity to take some of those learnings and change our messaging or strategy and we didn't. There was already a big investment made in putting together these ads and the thinking was, 'we spent all this money on these high-production ads, so we're going to use them'," he said, adding that as Quibi's launch approached, the decision to shift the marketing strategy away from focusing on the brand and toward the content "was made too late." </p><p>"General awareness was our number one metric," he said, noting that although the marketing team didn't reach its goal of 40-60% awareness among its target audience, the number wasn't terribly weak. But, "we had a steep dropoff between awareness and familiarity," he noted. </p><p>"Through the interview process, even I didn't fully understand what Quibi was, so I knew it would be an uphill battle," he said. "Familiarity was very low – below 10%," he added.</p><p>Management's slow response struck him as part of a larger pattern of poor decision-making. </p><p>"Egos were at play, with big, well-known people involved who've been fairly successful – it gets you into thinking that 'everything I'm gonna do or start or work on is gonna be great'," he said. "There's a lot to be learned from what Quibi did well and didn't do well." </p><h2>UGC vs Premium Content
</h2><p>For Laura Martin, a media analyst and managing director of investment banking and asset management firm Needham & Company, one big lesson is about the future of mobile content businesses. </p><p>"I think Snap is basically a successful Quibi," she said. </p><p>That is, companies that develop a user base through low-cost, user-generated content (UGC) give themselves a better and safer pathway to expanding into offering premium, paid content on mobile. Quibi tried to do the reverse, attempting to build a user base on top of its unproven premium content offering. </p><p>"Those (UGC) models are proving to be more resilient," Martin said, pointing to Instagram and TikTok in addition to Snap. "And I'm not sure the lesson is any different if Quibi had launched a year earlier."</p><p>Her takeaway: successful mobile content apps will have UGC as their basis of competition, not premium content. </p><h2>What Happens Now?
</h2><p>Uzzaman said he expects Quibi to refund investors in two installments. The first will be a percentage of the company's remaining cash. If it is $350 million, as has been <a href="https://www.wsj.com/articles/quibi-weighs-shutting-down-as-problems-mount-11603301946" rel="noopener noreferrer" target="_blank">reported</a>, that would suggest to Uzzaman that investors will be refunded 20% of what they invested – the same percentage that remains of the $1.75 billion Quibi raised. </p><p>The second installment should come once Quibi has sold its remaining assets: namely its content library, IP and technology. Uzzaman said the best-case scenario for the sale of content would likely be another $350 million, meaning that at best investors would earn a 60% haircut. </p><p>Looking forward, Uzzaman said Pegasus will be more cautious in evaluating investments. He believes the pandemic kept Quibi from being able to execute its business plan, so he will give greater weight to worst-case scenario analyses in the future. And he will place a higher priority on having founders who have run a startup in the past. </p><p>Uzzaman noted that the way Quibi grew — fundraising nearly two billion dollars before validating its concept in the market — is a relative rarity in the startup world. Its failure, he said, serves as a lesson that venture capital "should go back to the lean startup model, where you start small and grow gradually as you see market traction." </p><p>"It's the safest way to make sure that even if you have a failure" — which, he noted, is part and parcel of startups and VC — "it's not as big as this one." </p><p>---</p><p><em>Sam Blake primarily covers media and entertainment for dot.LA. Find him on Twitter @hisamblake and email him at samblake@dot.LA</em><br/></p>
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Less than seven months after launching, the high-flying streaming service Quibi has shut down.
Despite a sold-out advertising slate, deals with A-listers and a $1.75 billion war chest from high-profile investors the former Disney executive and founder Jeffrey Katzenberg couldn't make the short-form mobile video platform stick.
<p>Katzenberg called investors on Wednesday to tell them Quibi would shut down, ending one of Hollywood's most high-profile streaming endeavors by a storied executive. The Wall Street Journal <a href="https://www.wsj.com/articles/quibi-weighs-shutting-down-as-problems-mount-11603301946" target="_blank">first reported</a> the news. </p><p>Shortly after, Katzenberg and the company's CEO, Meg Whitman, published a post on Medium acknowledging the news and blaming it on a combination of the pandemic and the execution. </p><p>"Quibi is not succeeding," they wrote. "Likely for one of two reasons: because the idea itself wasn't strong enough to justify a standalone streaming service or because of our timing."</p><p>The two said they would return cash to shareholders and look for buyers for their remaining assets.</p><p>"While the result was not what any of us wanted, we did accomplish a number of things and we are very proud of what the talented Quibi team has built with the blood, sweat, and tears that they poured into this business over these past two years," they wrote.</p><p>Katzenberger had tried to sell Quibi to tech giants such as Apple, Facebook and NBCUniversal, <a href="https://www.wsj.com/articles/quibi-explores-strategic-options-including-a-possible-sale-11600707806" target="_blank">The Information</a> reported. All passed. He also considered taking the company public to raise additional funds, <a href="https://www.wsj.com/articles/quibi-explores-strategic-options-including-a-possible-sale-11600707806" target="_blank">according to the Wall St. Journal</a>. That didn't pan out either.</p><p>"Our failure was not for lack of trying; we've considered and exhausted every option available to us," Katzenberg and Whitman wrote.</p><p>Launched on April 6, with dozens of short-form original series, Quibi executives said they did not intend to compete with Netflix or Hulu. Instead, they hoped targeted viewers on their mobile devices for short-form content, aiming to catch them while they were waiting in line or looking for a quick entertainment fix in between other moments. But the company failed to catch on and faced fierce competition by YouTube, Facebook and other short-format video platforms that millennials and Gen Z have already adopted.<br/></p><p>Katzenberg had previously blamed lackluster user reach on the pandemic and the stay-at-home culture it created for putting an end to the commutes and time spent waiting in line where they hoped to meet their audience.</p><p>"The circumstances of launching during a pandemic is something we could have never imagined but other businesses have faced these unprecedented challenges and have found their way through it. We were not able to do so," he and Whitman wrote.<br/></p><p>Another disadvantage was the astronomical production costs for creating the content, were reported to be up to $100,000 each minute. Quibi had signed on stars <a href="https://www.nytimes.com/2020/03/06/arts/television/quibi-shows-stars.html" rel="noopener noreferrer" target="_blank">like Chrissy Teigen, Tyra Banks and Tom Cruise</a>.</p><p>But with no hit show or catalog of familiar flicks, Quibi struggled. Plus, it arrived in the middle of the pandemic when mobile users were stuck at home, not waiting in lines or riding public transit.<br/></p><p>Quibi attracted investment from some of Hollywood's biggest players including the Walt Disney Company, 21st Century Fox, Metro-Goldwyn-Mayer Studios Inc., NBCUniversal, Viacom Inc and Sony Pictures Entertainment Inc.</p>
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Ficto, a cross between Quibi, Netflix and a video game that is set to launch next month, got a big boost this week when LG announced the app would come preloaded on 1.3 million of its new double-screened LG Wing smartphones.
The deal should help Ficto stand out from the competition by (literally) putting it in people's hands.
The mobile streaming service set to launch in October will focus on shows that leverage the smartphone's unique features, bringing to them a heavy dose of interactivity and social engagement. It also offers some brands, like LG, product placement and a degree of creative control in their shows. "Snoop 16," an interactive gameshow hosted by Long Beach native Snoop Dogg, will debut as one of the streamer's original programs.
<p>Mike Esola is the chief executive of L.A.-based Fiction Riot, a.k.a. Ficto. He told dot.LA that talks with LG began about a year ago. Both companies thought the other would be a good match.</p><p>"(LG Wing) is best utilized by apps that exhibit premium-level content on the main screen and interactive functionality features on the second screen," Esola said. </p><p>In exchange for the preloads, Ficto will embed LG products into some of its programming. LG will be paying for the product placements as well, a revenue stream that will likely be key to the free service's growth. In future phases of the partnership, LG will also include the app on other phones and televisions, Esola said.</p><p>Ficto has had about 60,000 users during its beta period. It will launch next month with dozens of licensed shows and seven originals. The latter group is where its mobile- and social-oriented content will predominate.</p><p>"Snoop 16" episodes, for example, will center around a March Madness-style bracket, except the competitors will be various items like rappers or cars; viewers will fill out and submit their own brackets, and if they match Snoop's, they will receive an LG Wing smartphone giveaway.</p><p class="shortcode-media shortcode-media-rebelmouse-image">
<img type="lazy-image" data-runner-src="https://dot.la/media-library/eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJpbWFnZSI6Imh0dHBzOi8vYXNzZXRzLnJibC5tcy8yNDQwNDQ0Ni9vcmlnaW4uanBnIiwiZXhwaXJlc19hdCI6MTYzNDUyMzc0NH0.21-8gFyM3X7MgAYN4nJsUBzoMuJbEcnU6ln_q_ZrPT8/image.jpg?width=980" id="59e01" class="rm-shortcode" data-rm-shortcode-id="a24b43a156249fc28f966b0eb5403413" data-rm-shortcode-name="rebelmouse-image" />
<small class="image-media media-caption" placeholder="Add Photo Caption...">Streaming service Ficto is creating shows with LG's new smart phone in mind.</small><small class="image-media media-photo-credit" placeholder="Add Photo Credit...">Courtesy of Ficto</small></p><p>Esola acknowledged there is no guarantee the new phones will sell. And getting the app integrated with LG Wing's swiveling second screen required investment.<br/></p><p>"It's not easy to adapt to a new form factor," Esola said, referring to the phone's shape and size. "Apps don't (usually) spend the time [to adapt] until they know. We took the risk."</p><p>In doing so, LG is betting that Ficto can break through in the crowded streaming field. It will aim to do so largely through interactivity, which Esola has referred to as a form of "engaging and empowering" viewers. </p><p>The ability to share Ficto content across social media is a departure from fellow mobile-oriented streamer Quibi, which did not allow users to share content clips. After a disappointing launch, the L.A.-based company <a href="https://hypebeast.com/2020/6/quibi-app-revamp-coronavirus-airplay-sharing-features-update" rel="noopener noreferrer" target="_blank">recently added that feature, among others</a>. </p><p>By contrast, Ficto has built-in technology to enable sharing clips over social media while complying with copyright law. Ficto will also provide creators with some analytics about the performance of their shows, something that Esola says many streaming companies, namely Netflix, do not do. </p><p>Ficto <a href="https://dot.la/ficto-raise-2646273511.html" target="_self">has raised $5 million since it incorporated in March 2018</a>.</p><p>About 80% of the company's revenue currently comes from licensing shows to foreign markets, which allows apps in those markets to use Ficto's shows and essentially present them as their own. </p><p>The company also makes revenue from brand integrations, an area that is expected to grow as its user count climbs. Such arrangements allow a company like Anheuser Busch to "sponsor" a season or episode in exchange for a degree of creative control and product placement.</p><p>Ficto also licenses its proprietary technology for functionality like e-commerce integration and data analytics. </p>
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