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Short clips, big risk: This mysterious startup wants to turn streaming on its head

Short clips, big risk: This mysterious startup wants to turn streaming on its head

This CNN Business article features Magid’s Andrew Hare. You can visit the original post for a 4-minute video that includes portions of an interview with Hare.

Do you like Steven Spielberg and scary TV shows? Well, he’s currently working on one, but there’s a catch: it will only be available on mobile phones, at night.

Are you a fan of Jane Austen adaptations? That’s great! There’s a gay “Pride and Prejudice” inspired rom-com coming soon.

How about home renovation shows? Everyone likes those, right? Sure, but this one is a cross between HGTV and CSI, in that it only includes houses where infamous murders or crimes occurred.

Oh, and did we mention that these series will be diced up into short episodes — all just 10 minutes or less?

They’re all part of the lineup for Quibi, a new streaming service to be launched in 2020 by two veteran CEOs — Meg Whitman of Silicon Valley (she previously headed eBay and Hewlett-Packard) and Jeffrey Katzenberg of Hollywood (he led DreamWorks Animation).

Their new startup, short for “Quick Bites,” is an odd proposition — and a risky one at that.

As the streaming wars heat up, companies like Netflix, Apple, WarnerMedia (CNN’s parent company), NBCUniversal and Disney are all vying to be bigger and grander than their competitors. Whitman and Katzenberg are instead daring to go small.

The two are wagering a lot of money — and potentially their reputations as two of the business world’s mightiest moguls — on a bet that consumers will pay for a mobile-only, short-form video service.

There’s still a lot of mystery surrounding Quibi. While Disney+ shows off clips of “The Mandalorian,” Apple TV+ gives a sneak peek of Jennifer Aniston and Reese Witherspoon’s “The Morning Show” and HBO Max buys up familiar hits like “Friends” and “The Big Bang Theory,” Quibi has kept much of its programming close to the vest. This strategy has turned Katzenberg and Whitman into the faces of the product. They’ve been hyping the new service at South by Southwest, on CNBC, and in interviews in The Hollywood Reporter and Vanity Fair — but to date, they have yet to release any trailers of the shows and or previews of the Quibi app.

The service also arrives after decades of viewers being conditioned to long-form storytelling on TVs and big screens. It’s entering a market that’s already overrun by short-form content from the likes of YouTube, Instagram and Snapchat, which is mostly free of cost.

In a world that has new streaming services pop up seemingly every week, will there be enough room for Quibi?

Short clips, big budgets

Katzenberg and Whitman’s pitch for Quibi, which is set to launch in April 2020 for $4.99 a month with ads and $7.99 a month without, is simple yet distinctive. The service offers videos and series that are cut into segments shorter than 10 minutes. The content ranges from scripted, fictional series to news and sports highlights. And all of it can viewable only on mobile devices.

Unlike short-form videos on YouTube or Instagram, Quibi’s content comes along with high production budgets more akin to major series, and an intriguing tech capability: The videos are filmed and edited to be viewed both horizontally and vertically.

“What we’re trying to do is bring together the best of Hollywood and the best of Silicon Valley to make viewing short-form content on your mobile extraordinary,” Whitman told CNN Business during an interview at Quibi’s headquarters in Los Angeles. “We’ve got Hollywood quality content with some really very innovative technology that makes viewing video on your mobile something quite different than what it is today.”

Despite the high stakes, Katzenberg and Whitman are excited. “I think it’s the biggest idea that we’ve ever done,” Katzenberg said.

“I think we are doing something that is now such a well-established consumer habit. You have 2.5 billion people walking around with these televisions in their pocket,” he added. “They’re already watching a billion hours of content every day. I just know it’s going to work.”

The company will license content that fits into one of three categories: “Lighthouses,” which include the service’s premium videos, “Quick Bites,” or standalone episodes of reality and alternative programming, and “Daily Essentials,” consisting of sports and news coverage.

Quibi has also brought in a lot of A-list talent. There’s Spielberg, but also other big names like Oscar-winning director Guillermo del Toro, Anna Kendrick, Tyra Banks, Sophie Turner and Liam Hemsworth. In the series “Thanks a Million,” Jennifer Lopez will give away money to someone, who in turn, will have to pay it forward to others. In “Action Scene,” Kevin Hart will play a comedic version of himself trying to land a role in an action movie.

While Whitman and Katzenberg plan to make easily digestible content, that doesn’t mean it’s going to be cheap. Its “Lighthouses” content will cost roughly $100,000-per-minute to produce, which puts it on par with some of the most expensive shows on TV.

Think “Game of Thrones” production costs, but for a series cut into smaller snackable episodes.

The risks

But will anyone want to watch a series on the scale of “Game of Thrones” in 10-minute episodes? And if they do, will viewers really appreciate the production quality on such a tiny screen?

“Watching on your phone is actually becoming a very personal, intimate, connective moment,” Katzenberg said. “You put your earbuds in and you have a connection with that content that is actually amazing.”

Katzenberg feels that younger audiences are thrilled with the mobile experience and “will appreciate having the best talent in front of the camera and behind the camera.” He also mentioned that YouTube stars and social media influencers, while creative and innovative, have never had the resources in short-form storytelling that Quibi will now provide.

Katzenberg and Whitman aren’t the only ones betting on Quibi’s success. The company has lured some deep-pocket investors including Disney and WarnerMedia, as well as the e-commerce company, Alibaba. It has reportedly raised $1 billion in funding.

“These are smart people,” Katzenberg said of some of Quibi’s investors and partners in Hollywood. “They didn’t do this to be nice.”

Of course, those investors are betting not just on Quibi as an idea, but on Katzenberg and Whitman, who have had their fair share of professional wins and losses.

Katzenberg’s tenure at Disney in the 1980s and 1990s was marked by acclaimed and beloved films, including “The Little Mermaid,” “Beauty and the Beast” and “Aladdin.” However, Katzenberg’s boardroom battles with then-Disney chairman Michael Eisner in 1994 led to Katzenberg’s very public exit.

After launching DreamWorks with Spielberg and music mogul David Geffen, Katzenberg led DreamWorks Animation to hits like “Shrek” and “Kung Fu Panda.” He left the company after its sale to Comcast in 2016 and has maintained a low profile since then. Quibi now marks his ambitious return to Hollywood prominence.

As for Whitman, she helped grow eBay into one of the most notable internet brands in the world as president and CEO from 1998 to 2008. She then led Hewlett-Packard after suffering a political loss when she ran for governor of California in 2010 — a campaign where she reportedly spent more than $100 million, mostly of her own money. She then stepped down as HP’s chief executive in 2017, after splitting it into two companies.

Despite Whitman and Katzenberg’s impressive resumes, some critics continue to be dubious of Quibi’s long-term viability.

“Does Quibi truly solve a consumer problem?” Andrew Hare, a senior vice president of research at Magid, told CNN Business. “In a world with YouTube, Instagram, Snapchat, Twitch…do audiences under 35 really desire another platform with more exclusive short-form video?”

Hare added that he wonders if consumers’ viewing habits will change enough to give Quibi space to grow in the market. “Sure, we watch snippets of content all day on our phones, but we will also watch six hours of ‘Breaking Bad’ in a row on big screens,” Hare added.

Quibi has also been in the press lately as two executives have left the company, just months before launch. The high-level departures raised eyebrows in the industry.

Then there’s the price of it all. Will consumers want to spend money on Quibi? Hare isn’t so confident.

“I’m not sure we have much historic evidence that a younger demo is willing to pay much for short-form mobile video,” Hare said. “Consumers are looking at their budgets closer than ever. Many are paying for pay TV, HBO, Netflix, Hulu, Spotify and more already… It’s really going to need to prove extraordinary value to consumers to drive subscription scale.”

Katzenberg and Whitman are also taking a big risk releasing Quibi in the middle of the streaming wars. Disney, WarnerMedia, NBCUniversal and Apple will all launch their new services in the coming months.

But, according to Whitman, Quibi isn’t here to compete with Netflix, Disney+ or HBO Max. It’s a “completely different use case,” she said.

“When you watch the big streaming services, typically you’re at home watching in front of a TV, really committing to at least a half an hour, sometimes an hour, an hour-and-a-half to get into a show and watch a full episode,” she said. “We’re going after a different time of day.”

She explained that Quibi is going after consumers’ “in-between moments” whether that be waiting at a doctor’s office or standing in line for a cup of coffee.

Although plenty of naysayers are skeptical about Quibi’s potential, the same could have been said of streaming goliath, Netflix in its early days. Once seen as a non-threat to the industry, Netflix is now the company everyone else is chasing with more than 150 million subscribers worldwide.

Quibi’s commitment to being mobile-only may be what makes it a truly revolutionary service, according to Rich Greenfield, an analyst at LightShed. “The mobile phone is the most personal device in your life that virtually never leaves you. Just as we grew up with TVs, this generation is growing up with mobile,” he said. “If this becomes the must-have content service for the mobile generation, that would be a game changer.”

If Quibi takes off, it could have the potential to change the streaming market, how consumers think about short-form video and possibly even multimedia storytelling itself. But if it’s a flop, Whitman and Katzenberg’s Quibi’s run in the streaming market could be short lived. Either way, the stakes are high.

Yet, Whitman says she and Katzenberg aren’t too nervous and are “having a great time working together.”

“We are in the best sense, risk takers. But that doesn’t mean what we’re doing is risky,” Whitman said. “We’re not at the table rolling the dice — or if they are, they’re loaded.”

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