Should Quibi Launch in April Amid Coronavirus? Dilemmas of a $1.75 Billion Start-Up

“Bad news for everybody in their day-to-day lives is good news for Quibi,” Paul Hardart, a former Warner Bros. executive, tells TheWrap

Quibi, the $1.75 billion streaming startup from Jeffrey Katzenberg and Meg Whitman, is set to launch as planned on April 6  despite a global pandemic, but not without causing ripples of anxiety among the founders, TheWrap has learned.

Like most companies in California, the Hollywood-based Quibi offices are closed, with workers functioning remotely. Unlike most companies, Quibi is barely three weeks away from its scheduled April 6 launch as a subscription service for teenagers with high-quality, short-form content available to stream in “quick bites.”

Quibi has been gearing up for a massive launch, with millions of dollars of advertising in play and high stakes investors, including Disney and WarnerMedia, waiting to see if the concept can scale on the order of Netflix. A 30-second ad during the Super Bowl cost an estimated $5.6 million.

But the coronavirus pandemic has led to the cancellation of a glitzy launch party in Los Angeles, in which more than 150 celebrities with shows on the service were positioned to promote it over their massive social channels with content from the event.

“While we look forward to launching the Quibi app on April 6, we have decided to cancel our pre-launch event party out of an abundance of caution as we continue to monitor COVID-19,” a Quibi rep said in a statement. “Supporting the health and well-being of everyone involved is our top priority.”

Those in the upper ranks at Quibi concede this was a body blow — but one that can be weathered and even looked at in a positive light, strictly from a business standpoint.

“The opportunity to promote and publicize this in the way in which it had planned is a non-starter,” said a senior Quibi insider. “That’s not a trivial thing. But in the other column — people will be home with a lot of free time. Every one of them has a device… People are shut in with an extraordinary amount of time, and we have something to offer them, but hopefully entertain, inspire.”

That outlook — that the coronavirus, while a terrible and deadly development, offers a silver lining for Quibi — is shared by some analysts closely watching the company. Others remain skeptical that a mobile-only short-form video service, which costs $4.99 for ad-supported streaming and $7.99 for ad-free streaming, will be successful — no matter how many big names are attached to the project.

“The problem is that there really are no solid examples to date of short-form working as a premium platform play,” Guy Bisson, research director with Ampere Analysis, told TheWrap. “That remains the big unknown for Quibi and its investors. Katzenberg’s belief that really good content will always find an audience is absolutely right, [but] the problem will be getting enough really great programming that strikes a chord with the target demographic and stands out enough from the crowd in a market that is saturated with high quality, high production value content.”

Quibi has established streamers like Netflix, Hulu and now Disney+ to fight for viewers’ attention. Apple TV+ and upcoming services from WarnerMedia and NBCUniversal only add to the crowded field. And that’s not even counting free sites like YouTube — the internet’s biggest video destination — and Twitch. Quibi has its work cut out, even if the content is top notch.

At the same time, Quibi is entering a space where few others have succeeded in the past. Verizon’s go90 may be the most glaring analog, but it was unable to win over many viewers, despite it being free, coming pre-installed on millions of Verizon-owned devices and offering NBA and NFL coverage. The service launched in 2015, only to be shut down 3 years later, despite $1 billion in funding. Other mobile-centric platforms, such as Verizon’s VCast and Flo TV, floundered as well. If you were playing devil’s advocate, however, you’d point out they came out prior to 2010, when watching video on your phone was still a novelty.

Whitman and Katzenberg are betting things have changed in the last few years, with viewers being increasingly comfortable watching content on their phones. In an interview last year with TheWrap, Whitman said Quibi’s internal data showed millennials now watch an average of 60 minutes of content per day on their phones, or 10 times as much as they watched in 2012.

“We have a much higher quality of content — the producers, the directors, the stars, the amount we’re spending per minute of content,” Whitman said about comparing Quibi to go90.  “It’s really much more similar to Hollywood content, the major studios.”

Quibi certainly has star power. To attract subscribers, Quibi has greenlit shows from a who’s who of A-listers, including: Steven Spielberg, Lorne Michaels, Justin Timberlake, Bill Murray, Reese Witherspoon, Jennifer Lopez, John Travolta, Kris and Kendall Jenner and Stephen Curry, among others. The service will launch with more than 50 shows on its app, and by the end of the year will have debuted 175 shows.

The jury is still out on whether viewers, especially younger ones used to watching content for free, will be willing to pay to watch mobile-only content, even with the big names attached. But the coronavirus pandemic has given Quibi a bigger opportunity to strike at first.

The service also just announced that the first 90 days would be free.

“This is the best case scenario. This is like God giving them a gift to be able to launch while everyone is home without a lot to do,” said Ross Gerber, president and CEO of Gerber Kawasaki Wealth and Investment Management. “It’s not easy to get people to pay money for anything, but this is fortuitous for them, it makes spending $8 a month — while there’s no sports on and you’re stuck at home — seem like nothing. It’s a dream come true.”

Paul Hardart, a former Warner Bros. executive and current head of the Entertainment, Media and Technology program at NYU, echoed Gerber.

“Bad news for everybody in their day-to-day lives is good news for Quibi,” Hardart said. “They seem to have a lane opened for them now, with theaters closing, no live sports to watch, and people having an almost infinite amount of time [to watch more programming.]”

Early returns from countries impacted by the coronavirus indicate people are hungry for content. Netflix downloads surged last week in Italy and Spain, and TV viewing in South Korea was up 21% compared to the same time last year.

Quibi is looking to pull in as many viewers as possible up front by offering viewers a free 90-day trial. Hardart said this is a wise move, but added it might be smart to extend it even further. Quibi needs to grab as many subscribers as possible so that it can eventually raise more money, he said; $1.75 billion is a lot, but to keep up with its competitors and keep the stars on board, it’ll need to continue spending big on content. A large trial window will also help Quibi answer one of its challenges: getting people accustomed to watching premium short-form shows. Once viewers are hooked, it can then worry about convincing them to not cancel their monthly subscription.

Still, both analysts agreed that social distancing, coupled with the absence of sports and other content, offers Quibi a great opportunity. The road Quibi is traveling down is littered with the companies that tried and failed to make mobile-first content resonate with the masses. On top of that, it’ll need viewers to not only enjoy its shows, but enjoy them enough to spend up to $8 per month watching them. It’ll be tough, but Gerber believes with Whitman and Katzenberg co-piloting, Quibi can figure it out.

“I have two theories about Hollywood: You definitely bet on people, and if people make you money, they’re bound to make you money again,” Gerber said. “I wouldn’t bet against Katzenberg if he was launching a circus.”

Sharon Waxman

Sharon Waxman

Sharon Waxman, is the founder, CEO and Editor in Chief of TheWrap. She is an award-winning journalist and best-selling author, and was a Hollywood correspondent for The New York Times.

Sean Burch

Sean Burch

Tech reporter • sean.burch@thewrap.com • @seanb44 

Trey Williams

Trey Williams

Film Reporter covering the biz • trey.williams@thewrap.com • Twitter: @trey3williams



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