Insights: How To Avoid Quibi’s Gigantic Bust-Out In Your Own Startup

By 10/23/2020
Insights: How To Avoid Quibi’s Gigantic Bust-Out In Your Own Startup

It’s easy to snark about Quibi, which just became one of the biggest and quickest digital-media disasters ever. But let’s do it anyway.

Plenty of folks on Twitter, Facebook, LinkedIn, and elsewhere piled on this week when founder Jeffrey Katzenberg and CEO Meg Whitman announced that the shortform video company would wind down operations, with an official shutdown set for Dec. 1.

Many comments were along the lines of helpful, if rather pugnacious, suggestions on the alternative ways one could spend the $1.75 billion that Quibi raised in its short existence. While that subject is certainly fertile ground, this debacle is also providing genuine opportunities for businesses to learn about successfully navigating obstacles, often by doing the opposite of whatever Quibi did.


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So, rather than mourn (or mock) Quibi’s passing, let’s celebrate the chance to learn lessons that other companies can use to avoid stumbling into the same quagmire.

Lessons to be learned from Quibi’s demise

  • Too Much Money? It’s just possible that Quibi raised too much, rather than not enough, money to become successful (Magic Leap, which raised $2.2 billion, may have had the same problem). The fundraising attracted a lot of news coverage, plus interest from Hollywood producers looking for someone to finance pet projects. But time spent fundraising and managing investors is time not spent dealing with other crucial challenges, like making your shows distinctive, or creating the best possible user experience. By contrast, just look at the thousands of online creators who built far bigger audiences than Quibi despite single-digit team rosters and production budgets. What did those creators have instead of money? Lots of creativity, of course, but also an understanding of their particular medium’s needs and strengths, and a boundless willingness to learn and evolve. I’ve long said that art lives in the limits it faces. Quibi’s money effaced any understanding of its medium or any possibility of evolution in its development.
  • (Relevant) Content Is King. In line with “understanding and evolution,” as one young marketing guru told me when asked about Quibi’s demise, “You can have all the money in the world, but it’s content, content, content, content.” He’s using Quibi as an object lesson going forward. But it’s not just content, it’s content relevant to the specific platform. Quibi’s big content pitch was feature-length “lighthouse” projects broken up into 10 to 15 “chapters” that would unspool over days or weeks on mobile devices. There was literally no evidence suggesting consumers wanted the mobile-only, non-bingeable experience Quibi was offering. Effectively, Quibi was trying to create a new way to consume content, not just a new platform to distribute that content.
  • No Sharing Here? Yes, organic reach is dead, as YouTube, Facebook, and Instagram try to extract more ad dollars rather than making posts go viral. But that doesn’t mean your media platform should make it impossible for customers to screenshot and share your shows on social, which is what Quibi inexplicably did. Copyright concerns are understandable, but Katzenberg’s last-generation Hollywood approach to social sharing was a needless self-inflicted wound. Anyone doing media in this generation understands that social conversations are exactly what you should encourage and enable. In an era of nearly endless programming choices, nobody can run enough ads to break through without help from their friends. Help your superfans do what they do.

What to do when the black swan roosts

  • Circumstances Change; Can You? Katzenberg blamed Quibi’s problems on “bad timing” from the pandemic and lockdown, which arrived just as the app launched in April. That may be a comforting narrative for Katzenberg and, ahem, at least one other prominent leader suffering a reversal of fortune in recent days. But truth is, Quibi was badly positioned to start with, then failed to adapt when circumstances changed, which happens a lot. Not only was Quibi built on an unproven usage pattern, the company didn’t give users any other way to watch its content. When, suddenly, millions of possible customers were stuck at home all day, with lots more time and access to bigger screens, they couldn’t watch Quibi (it took months to add the ability to “cast” shows onto TV screens, which should have been there from the start). This era’s most basic media mantra is that consumers want to watch what they want, when they want, and where they want. Katzenberg, again, took a very old-media approach. When life changed, Quibi wasn’t ready. But stuff happens. Be ready for it.
  • Build An Asset. For all Katzenberg’s old-media missteps, he also declined to do the one smart thing every Hollywood studio has done for a century: build a library. Quibi had more than 100 shows, but didn’t own any of them. Producers got excited because Quibi deals not only paid well, but let them get back rights to their projects within two to seven years. That certainly encouraged big-name talent to get involved. But when Quibi hit the skids, and Katzenberg went looking for buyers, there was nothing to sell. And no surprise, there were no buyers either.
  • Franchises Are Bigger Than Stars. Quibi featured shows from lots of prominent Hollywood talent, both in front of and behind the camera. But again, that’s an old-school approach to programming. Other than perhaps Tom Cruise, Dwayne Johnson, and Will Smith, few Hollywood stars in recent years could deliver a big opening weekend for a movie. Now we don’t even have opening weekends. But look at what Hollywood pivoted to: billion-dollar blockbusters built around durable franchises and few big-name stars. And in streaming, the biggest hit to come from any new service the past year was The Mandalorian on Disney+.  Pedro Pascal stars, but you wouldn’t know it from the show; his face is always covered because his character’s lore makes it a mortal sin to remove his helmet. Disney built the show around a beloved minor character in the Star Wars universe, and fans turned out by the millions, rocketing the service’s fortunes to a galaxy far, far away. By contrast, Katzenberg and Whitman took a page out of the 1995 Hollywood strategy guide. They focused on recruiting talent rather than known properties, in hopes the stars would draw viewership.  Perhaps it would have been smarter to license franchise spinoffs from some of Katzenberg’s Hollywood pals instead.

Getting dazzled by fancy technology

  • Don’t Be Distracted By Whiz-Bang Tech. Another of Quibi’s big pitches to advertisers, users, and journalists was its Turnstyle technology, which allowed viewers to watch in either horizontal or vertical aspect. The hack was nifty enough, but it came with costs. Creators had to effectively create two different projects, framed for the different aspect ratios. Editors told me that it doubled post-production costs, though the company vigorously disputed that. More importantly, Turnstyle created tech hurdles and expenses (and a lawsuit) that distracted the company from fine-tuning basic capabilities like watching on a bigger screen or even, a Kantar Media study found, an effective way to fast-forward or reverse.
  • Fit The Business Model To The Business. Quibi not only wrapped ads around its programs, it also expected people to pay a monthly subscription fee. But YouTube has billions of hours of ad-supported free video. TikTok has millions of hours more. And in between, there’s IGTV, a resurgent Snapchat, and Facebook Watch. Why would they pay for Quibi’s shows? The company never had a compelling answer.

Katzenberg said in a release that the company was founded “to create the next generation of storytelling.” The reality was that he and Whitman built their company predicated on business practices and strategies from the last generation of old-school Hollywood media, even as they promised a new kind of experience for a very different medium. Then they layered in complicated tech, an inability to adapt to dramatically changed circumstances, and a mismatched business model. Let’s hope the next time someone raises a few hundred million dollars for a new streaming service, they find smarter ways to spend that dough.

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