Netflix May Discover Treasure in Quibi Wreckage
(Bloomberg Opinion) -- After barely six months, Quibi has been defeated in the streaming wars. The mobile streaming-video service is now seeking a rescue bid, but rather than find a buyer, it’s far easier to come up with a list of companies that can emulate Quibi — and outdo it. Netflix Inc., Walt Disney Co., Facebook Inc.’s Instagram, Google’s YouTube and ByteDance Ltd.’s TikTok all come to mind as companies that have a chance to marry short-form Hollywood storytelling with on-the-go social viewing in the way that Quibi should have pioneered.
The service, created by Hollywood mogul Jeffrey Katzenberg and run by former Hewlett-Packard CEO Meg Whitman, started out as a good idea: HBO-quality scripted series and other types of studio-produced programs broken into very short episodes, social-media style, for people to scroll through and watch while commuting or waiting in line at a store. The name itself is a portmanteau of “quick bites.” But the idea quickly failed, as Quibi struggled to lure subscribers and didn’t have the kind of shareable features that could have set the mobile service apart from the streaming-app crowd. Now, Katzenberg is reportedly exploring a sale as well as any other desperate options, including raising more money or going public through a special-purpose acquisition company (or SPAC).
Instead of buying Katzenberg’s creation, it may be only a matter of time before an entertainment giant out-Quibis Quibi because there’s nothing particularly proprietary about the brand.
To be fair, a mobile-only streaming service probably didn’t have a chance in 2020. The Covid-19 virus hit just before Quibi’s April launch, sending viewers home to stream entertainment from devices larger than their smartphones and seek longer shows to pass the time, not shorter ones. But even those that did give Quibi a shot found that its library was a hodgepodge of content with no particular thread holding it all together, and the quality was mixed at best. The business also boldly charges $5 a month with advertisements; it costs $8 — more than a Disney+ subscription — to turn off the ads.
From a business standpoint, another factor working against Quibi in its quest to be taken over is that the service doesn’t own its programming — content creators do. Quibi licenses its works for seven years, something Whitman and Katzenberg have both stressed to get Hollywood on board. And so with few subscribers, little brand cachet and no real assets (aside from maybe some cash), Quibi doesn’t present much value to any buyers.
Some may point to Quibi’s Turnstyle feature as a unique asset, but that may not be so — it’s the target of a patent lawsuit. The Turnstyle technology allows viewers to see different filming angles by rotating their phones. It’s a neat feature, but it gets old fast because most users aren’t going to keep flipping their phones back and forth while trying to watch a show.
In fact, Turnstyle shows where Katzenberg took a wrong turn in developing Quibi. He spent too much time focusing on Quibi as a tech tool and curation service and not enough time fine-tuning the content and value proposition for consumers. As good as Netflix’s technology is, people subscribe because of its fairly decent (and improving) catalog flush with content at a reasonable price. That’s why Netflix at $13 a month is a better deal than Quibi at $5.
Katzenberg also drew from the brevity aspect of social media but left behind the more lucrative opportunity to build an interactive streaming community. I’ve written again and again about how social viewing will be the future of streaming-video services and may be one of the missing links in making the industry’s economics work. There's no reason that studio-produced content shouldn’t live alongside the kind of user-generated videos seen on Instagram, TikTok and YouTube. To users, especially younger people, it’s all just content — whether it be a silly dance posted by their friends, a celebrity like Cardi B addressing her fans through the selfie camera, or the latest Disney or Netflix hit. Consider that when Netflix released “Tiger King,” it went viral on other companies’ services in the social-media sphere. There’s absolutely an opportunity to vertically integrate streaming and social media, and Quibi missed its shot.
Maybe a buyer emerges for the wounded brand. Or perhaps more likely, Quibi waves Qui-bye and something better comes along.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Tara Lachapelle is a Bloomberg Opinion columnist covering the business of entertainment and telecommunications, as well as broader deals. She previously wrote an M&A column for Bloomberg News.
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