After $1.75b (£1.3b) dollars of investment from the likes of some of the biggest companies in entertainment, content starring, or produced, by A-list names such as Kevin Hart, Liam Hemsworth, Drake, Anna Kendrick, Laurence Fishburne and Kiefer Sutherland, plus having Hollywood legend Jeffrey Katzenberg and billionaire Meg Whitman steer your ship you’d think not much could go wrong.
Today Quibi, the platform specializing in short-form mobile-only content, announced in an open letter that it would be completely winding down the company and selling off all of its assets. The streaming service has been running since April.
Part of the joint announcement signed by Katzenberg and Whitman reads: “Quibi is not succeeding. 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.”
Unfortunately, we will never know but we suspect it’s been a combination of the two. 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.”
Inside the numbers
As reported earlier, looking at the numbers and the model there are some immediate concerns in scope that are immediately visible. The service spent $1.1b (£840m) on content in its first year alone. $100,000 (£76,000) per minute, for the top tier of short-form series’ available.
Though viewing habits are changing, had they ever changed enough to warrant such massive investment into content that can only be viewed on smaller devices?
Research firm Apptopia concluded that Quibi had made $3.3m (£2.5m) in subscriber revenue since its launch and had spent $400m (£304m) advertising the platform and content therein. Of course, you would always expect there to be a loss at first for a platform like this but these margins are sizable.
The conundrum of IP
Further to the numerical disconnect comes the intellectual property business plan. American broadcasters have a worldwide reputation on driving a hard bargain for IP. Most U.S. broadcasters want to take all ownership and leave the producers and creators with the small fees associated with the budget.
This model is designed to allow the broadcaster to exploit the programming, it likely paid for, in perpetuity. Generating another major stream of income. Quibi, however, had different ideas.
Quibi owns none of its content. It instead licenses the content for seven years and allows the IP owners to repackage their shows after two years and sell it to other broadcasters, perhaps as a long-form proposition.
This is great for producers, but as a model was this ever sustainable? There’s a reason why U.S. broadcasters muscle IP from producers off the back of their usually enormous content investments. Recoupment of funds. As Quibi only had very limited revenue streams, primarily from subscription, its model was ergo predicated on massive success in that department.
The gamble leant on utilizing massive names to bring subscribers to the platform, focusing on the younger demographics, who statistically consume most of their content using mobile applications.
What does this tell us about the film and TV landscape? During an unprecedented boom for many streaming services, like Netflix NFLX who picked up even more subscribers during the pandemic, plus major studios angling more towards video-on-demand amidst the continuous downward spiral of cinema, Quibi has failed. Even though it had A-listers and strong programming throughout its platform.
Though Whitman and Katzenberg iterated their theories we must look towards the machinations of the platform’s plan. Was it really necessary to make the platform strictly mobile-only? Understandably the service was trying to dominate that marketplace, but to not have any availability or proposition on linear…at all.
Intellectual property. It makes sense to entice producers to make shows for you by gifting them an enormous amount of rights, but not at the expense of the massive revenue stream that is IP. Even splitting it would’ve sufficed and would have still placed them as an extremely producer-friendly U.S. based entity. Especially amongst its on-demand competitors.
The most astonishing element is that no major investor for the platform from Alibaba BABA , WarnerMedia, Walt Disney DIS or NBCUniversal saw any of this coming. Instead, the powerhouses were drawn into the allure of a Jeffrey Katzenberg product whilst potentially not doing the due diligence on the marketplace amongst worldwide consumers and the entertainment marketplace as a whole.
From a producer’s perspective, it’s a shame to see the platform potentially go, if it’s not acquired, but I can’t say it’s a huge surprise.
Source: Forbes – Business