Jeffrey Katzenberg and Meg Whitman merged Hollywood and Silicon Valley connections, but it wasn’t enough to save Quibi.
Taylor Jewell/Invision/AP; Richard Drew/AP; Shayanne Gal/Business Insider
- Mobile content app Quibi, backed by $1.75 billion and some of Hollywood’s top names, launched in April and died in October.
- Jeffrey Katzenberg and Meg Whitman led the company, which missed warning signs and took costly missteps in the leadup to and after its debut.
- Business Insider tracked the buildup to and aftermath of Quibi’s ill-fated launch.
- Visit Business Insider’s homepage for more stories.
With just a few weeks to go until one of the biggest product launches in their careers, Jeffrey Katzenberg and Meg Whitman met alone for several hours.
The two veteran business executives, representing the top echelons of Hollywood and Silicon Valley, were suddenly forced to discuss the future of the project they’d worked on — and promoted — almost constantly for the past two years.
Their vision for a game-changing streaming video service called Quibi had raised a stunning $1.75 billion in capital. But their plans never foresaw a pandemic, and when Katzenberg and Whitman sat down in mid-March, the novel coronavirus was beginning to show that it was not a blip. Hospitalizations across the US were increasing; restaurants and schools were closing.
Seth Doane — a CBS news correspondent helming a special version of the “60 Minutes” news program being created exclusively for Quibi — fell ill with COVID-19 that month, and 16 members of the show’s team tested positive. The virus was affecting everything.
Should Katzenberg and Whitman delay the launch of Quibi, slated for April 6? Did the idea, conceived as a way for on-the-go millennials to consume “quick bites” of Hollywood-quality video on their phones, even make sense any more? And even with Quibi’s roster of A-list talent like Steven Spielberg and Kevin Hart, would anyone pay $5 to $8 a month during an economic crisis?
The two execs, whose relationship had reportedly become strained during the multi-year collaboration, went through all the aspects of their carefully crafted business plan together. In the end, Katzenberg later told the Recode Media podcast, they decided to gamble:
“Pedal to the metal, “Katzenberg said. “Let’s actually go do this.”
The gamble, we now know, did not pay off. And, in what is destined to go down among the most high-profile and expensive business flops, it took only six months to unravel.
Whether Quibi’s demise was the result of uncontrollable acts of god or the inevitable product of overconfidence and bad assumptions is sure to be debated for years to come. But an up-close look at Quibi’s short lifespan shows unheeded warning signs and costly missteps at key moments that hinted at the debacle to come.
This account of Quibi’s six-month failure to launch is based on Business Insider’s own reporting, as well as reporting from The Wall Street Journal, The New York Times, Deadline, The Information, and other news outlets.
A Silicon Valley and Hollywood power couple
Few people understand the world of movie studios quite like Katzenberg, who made his name as chairman of The Walt Disney Studios in the ’80s and ’90s. Katzenberg left Disney to cofound and chair DreamWorks Pictures, then ran DreamWorks Animation as CEO until 2017, when Comcast acquired the studio for $3.8 billion.
This outsize reputation is part of Katzenberg’s aura, conferring an immediate glow of significance and buzz to anything he’s involved in. The famously garrulous New York native, now 69 years old, is not shy about touting his track record and displays little self-doubt about his talents as a hit-maker.
“I’ve been doing this before you all were fucking born,” Katzenberg boasted to the Verge in an interview about Quibi earlier this year.
Meg Whitman and Jeffrey Katzenberg.
Stefanie Keenan/Getty Images for The Hollywood Reporter
He met Whitman in 1989 while they were both at Disney. She was the only person on the business side that Katzenberg could stand talking to, he told Fortune.
When Katzenberg was dreaming up his idea for a new streaming service some three decades later, Whitman was an established Silicon Valley power player, famous for taking eBay public as its CEO and transforming it into a multi-billion dollar ecommerce powerhouse.
In November 2017, when Whitman announced her departure from her gig leading Hewlett-Packard Enterprise, Katzenberg hopped on a flight to Northern California. Over the course of a three-hour meal he convinced Whitman to take the CEO job at his yet-to-be-named streaming video company. She listed her house in Atherton, California – the most expensive zip code in America – and moved into a condo in West Hollywood.
Shayanne Gal/Business Insider
Whitman brought tech cred to the venture — a critical element for a project whose success would hinge as much on reliable infrastructure and smartphone-savvy as it would on Hollywood pixie dust.
“I’ve built things, and I’ve fixed really big companies. In the end, it’s a bit more fun to build,” Whitman told the Hollywood Reporter about her decision to join Quibi.
She quickly showed her value in other ways too: Whitman vetoed Katzenberg’s wish to call the video app “Omakase,” a reference to a Japanese sushi restaurant ritual in which the chef customizes a multi-course meal, the Wall Street Journal reported. They agreed to hire a brand-naming firm that came up with Quibi, short for “quick bites.”
While the two executives each had their own well-defined lanes to stay in, there were occasional sparks of friction. In May 2018, Whitman threatened to leave the project altogether, telling Katzenberg that he was dictatorial and treated her like an underling, according to the Wall Street Journal. To get her to stay, Katzenberg, who was Quibi’s chairman, agreed to give Whitman more independence, befitting her role as CEO.
Quibi did not respond to Business Insider’s request to make Kaztenberg and Whitman available for comment.
Aren’t you a bit old for a millennial?
The one thing Whitman and Katzenberg were missing was a birth date that put either of them anywhere near the 25-to-35-year-old age group that Quibi defined as the “bullseye” of its audience.
A service aimed at social-media obsessed millennials was being spearheaded by two sixty somethings. Whitman acknowledged in an interview that she wasn’t an “entertainment enthusiast” and demonstrated the fact by citing a History Channel program about President Grant when asked to name a show she liked.
Perhaps it wouldn’t matter.
Katzenberg teed up Hollywood A-listers and the industry’s deepest pockets for the new venture.
All of the major Hollywood media companies and studios lined up to back the startup, contributing $1 billion for a May 2018 seed round.
One media banker told Business Insider in January that investors piled in not because they were enamored by the company’s pitch, but because they feared missing out when they saw competitors writing checks. The Katzenberg aura was working its magic.
Big Hollywood names, from Steven Spielberg to Idris Elba to Chrissy Teigen, signed up on the content side — a formidable talent roster that didn’t come cheap. Quibi’s top productions – full films cut down to chunks shorter than TV shows – cost as much as $125,000 a minute, or $7.5 million an episode, according to Digiday.
Quibi also paid for the whole cost of the show and 20% on top, an attractive setup for producers.
In all, Quibi expected to spend more than $1 billion on content and more than $450 million marketing and technology, Katzenberg said in 2019.
Hollywood movies streamed in 5-minute chapters
The steep costs were part of the strategy, the two executives repeatedly explained to a succession of skeptical interviewers.
Quibi wasn’t competing with the social media videos flooding YouTube and other web platforms. It was producing Hollywood-quality content that would be “delivered to you in chapters” lasting between three and nine minutes, Katzenberg said.
The videos would be so compelling that consumers would pay $5 a month to watch with ads, or $8 a month without ads.
Katzenberg pointed to the success of HBO. “Broadcast TV was fantastic and free and yet many of us were happy to pay for something different, premium, a different type of content,” he said at the 2019 Fortune conference.
“It’s not movies, it’s not television, it’s the next thing,” Katzenberg said of Quibi.
The “next thing” would be available only on smartphones, a bold strategy that underscored the company’s vision of a TV that lives alongside consumers throughout the day, as well as differentiating it from an increasingly crowded field of streaming video competitors that would soon include Disney, Comcast, Apple, Netflix, and Amazon.
Quibi CEO Meg Whitman speaks during a Quibi keynote address at the 2020 CES in Las Vegas
Quibi even designed its own video watching technology called Turnstyle, which lets viewers watch different perspectives, and occasionally special information, by rotating the mobile screen between horizontal and vertical.
“You’re quite closer [to the camera] and you don’t have all the cinema-scope around you,” Catherine Hardwicke, executive producer of the Quibi show “Don’t Look Deeper,” told Axios in January. “In a landscape format, you feel more the environment — what the character is interacting with. It’s interesting — you could watch the whole show twice.”
The programming was a mix of high-production dramas, news programs, and absurdist pieces like the reality show “Dishmantled,” in which blindfolded chefs get blasted in the face with a liquefied meal and then compete to recreate the dish.
“It’s never failed before”
As the coronavirus upended life and closed businesses in the opening months of 2020, Quibi’s bet of commuting millennials gobbling up its premium content on buses and in Ubers began to look shakier.
A month before Quibi’s debut, the pandemic forced its show hosts to relocate from headquarters into quickly-fashioned garage sets. Doane and the covid-infected crew from Quibi’s “60 in 6” news show were completely out of commission for the next couple months.
Katzenberg and Whitman made some adjustments. The red carpet opening party in LA was cancelled. And the 7-day free trial period would be a 90-day free trial instead.
But Katzenberg’s gut told him he had a hit on his hands.
“It’s never failed before,” Katzenberg said on the Recode Media podcast in early April.
“Very, very good” content always works, he said. “So if we do fail, if this does not work, this will be the first time that I know of.”
On April 6, right on schedule, Quibi launched in the US, Canada, and India.
Immediate reviews weren’t kind: “a mixed bag,” “a shallow pool,” “a big pile of unnecessary stuff that’s digested as quickly as it’s forgotten.”
The app hit 1.7 million downloads in the first week and missed its target trials for the first month. A tie-up with T-Mobile, which gave some wireless customers a free year of Quibi, didn’t deliver the 500,000 subscribers Quibi anticipated because T-Mobile shut some of its locations amid the pandemic.
Despite high production value and Katzenberg’s unusual level of involvement in shows, from wardrobe to set design, Quibi didn’t land any immediate breakout hits. Some of the show concepts puzzled viewers, like a home makeover for houses where grisly murders had occurred – a dark spin on HGTV – or became widely mocked, like a drama about a woman obsessed with her golden arm. “Dishmantled,” the cannon food show, seemed at odds with the pandemic-era headlines of empty grocery shelves and record lines at food pantries.
Even for shows that landed better, Quibi failed to get much pickup on social media. At launch, the platform discouraged shareability, turning off screenshots because of copyright issues until a fix in late July.
On launch day, fewer than 30,000 people talked about Quibi on Facebook, per Thinknum data. Chatter peaked in mid-May, at about 400,000 per day, before dropping precipitously by the end of the month so that by early June, only about 10,000 people were talking about the company.
Shayanne Gal/Business Insider
Ten days after launch, Quibi fell out of the top 50 most downloaded iPhone apps, and on April 22, Megan Imbres, the head of brand and content marketing, who reported to Whitman, left. In May, major advertisers sought to renegotiate terms of their agreements because of concerns over Quibi’s low viewership and general worry about the pandemic’s effect on their businesses.
At an all-hands meeting that month, Quibi executives cited a number of issues that hindered the launch, including the coronavirus, too much reliance on scripted programming, inactive users, and low viewer enthusiasm.
“I attribute everything that has gone wrong to coronavirus,” Katzenberg told the New York Times, a statement he later said he regretted.
In late May, the company started revamping programming, which included not renewing Idris Elba’s show and scrapping other shows slated for shooting this year.
A bittersweet awards ceremony and a string of rejections
The Emmys should have been a moment of validation for Katzenberg and Whitman.
September’s glitzy awards are the TV industry’s highest accolade, and Quibi had managed to scoop up two Emmys barely six months after launching (along with nominations for another eight).
But comedian and award show host Jimmy Kimmel derided it as “the dumbest thing to ever cost a billion dollars,” reflecting the extent to which the app was becoming a punchline in Hollywood. And behind the scenes, the company’s leadership was facing up to the grim reality that it needed to figure out a path forward, fast.
In mid-September, the Wall Street Journal reported that Quibi was looking at raising more cash to support itself, or even going public. It then went on to quietly hire consultancy AlixPartners LLP to help decide on a plan of action.
Management began shopping the company around — but to no success. Apple, WarnerMedia, and Facebook all declined to pursue talks to acquire Quibi, according to The Information. Among the challenges for a deal were Quibi’s special licensing terms, which only gave the company exclusive rights for 2 years to all the original content being created.
Quibi CEO Meg Whitman and cofounder Jeffrey Katzenberg.
Kevork S. Djansezian/Getty Images
In mid-October, Quibi belatedly brought out apps for Apple TV, Fire TV, and Android TV, finally abandoning its mobile-only vision. But it was far too late to make a difference.
Two days later, on October 21, Quibi announced it was shutting down.
After informing investors and employees, Katzenberg and Whitman shared the news publicly in a cosigned open letter that acknowledged both the pandemic and the core business itself as contributing factors to Quibi’s demise.
“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,” they wrote.
Katzenberg recommended that Quibi’s shocked employees listen to a song from the 2016 movie “Trolls, which according to The Wall Street Journal, he believed might “buoy their spirits”:
“I’m off on this remarkable adventure
Just riding on a rainbow.
What if it’s all a big mistake?
What if it’s more than I can take?
No I can’t think that way ’cause I know that.
I’m really, really, really gonna be okay.”
Katzenberg and Whitman decided to pull the plug proactively. The company is closing with $350 million still in the bank, which it intends to return to investors to mitigate their losses.
“We’ve looked very clear-eyed at the data and said what’s the right thing to do,” Whitman told Deadline in a post-announcement interview. “In order to get to scale we would have to raise more capital, a lot more capital and we would need to be raising it in the first part of next year. And we don’t think that we would have the data and the metrics to support another capital raise at that point.
“Ultimately probably a couple weeks ago we said, you know, the right thing to do, the hard right but the right thing to do is to return cash to shareholders.”
From Hollywood darling to failure in just 199 days
It was a deflating end for a wildly ambitious startup that had launched exactly 199 days earlier.
At one point pre-launch, the company was internally modelling for $250 million in subscription revenue in its first year. Mobile analytics firm Sensor Tower estimated that by late October, nearly seven months after launch, it had achieved just a tiny fraction of that: $7.7 million.
Shayanne Gal/Business Insider
The shuttering leaves some of Quibi’s content providers in the lurch, uncertain as to the future of their creative material, teams, or programs. Quibi’s bite-sized nuggets of dramas and shows could be stitched back together to form standard length programming that could air elsewhere, but it’s unclear whether the show creators can do so during the next two years of Quibi’s exclusive licensing.
As news of the end spread, some industry insiders commended the team for accepting the reality of the situation rather than burning through the remaining cash.
So what’s next for Whitman and Katzenberg? The technology executive demurred when asked by Deadline, saying she didn’t know.
Katzenberg, the media mogul whose magic touch had suddenly faltered, quickly pointed to a destination that evoked an earlier, more successful time: “I’m going to Disneyland.”