By Jon Swartz
LAS VEGAS – Somewhere on the digital-entertainment prism — between premium streaming services and free, quirky content on YouTube — Quibi Inc. hopes to occupy a crevice that until now has gone unclaimed.
It’s the slice in the upper-right-hand quadrant of a market research paper provided by the Hollywood, Calif-based startup that has raised a jaw-dropping $1.4 billion in venture funding and is headed by two titans of business: Chief Executive Meg Whitman and founder Jeffrey Katzenberg. But they have only a few months to make its case in shark-infested waters that consumers should sign up before it goes live in April.
That is why Whitman and Katzenberg stood on stage Wednesday for a keynote address at CES, “Mobile phones are the most highly democratized platforms for entertainment we’ve ever seen,” Katzenberg said. “As 5G ramps up network speed, consumers will watch even more.”
“This is something new and powerful,” Whitman said. Quibi, she said, is building a platform for creators to take full advantage of content on phones. Later Wednesday, Quibi disclosed it raised $400 million in a second round of funding from investors. The Los Angeles-based company, which previously raised $1 billion, did not disclose its investors.
Quibi (short for “quick bites”) offers short-form videos of 4 to 10 minutes on everything from long-form movies in the form of chapters to serialized shows and daily news reports. It’s collaborating with a stable of directors (Oscar winners Steven Spielberg, Guillermo del Toro, and Steven Soderbergh), A-list celebrities (Reese Witherspoon and Bill Murray), and studios such as BBC, ESPN, and NBC News. In all, it will showcase 8,500 episodes in its first year. It intends to offer 3 hours of fresh content a day.
“We’re not YouTube, Instagram, or Facebook. /zigman2/quotes/205064656/composite FB +0.78% We fill a niche they don’t do; we provide content for people on the go,” Whitman told MarketWatch in a one-on-one interview and product demo in San Francisco before she and Katzenberg were to deliver their CES keynote speech. She gave a sneak preview of exclusive, premium content available on the mobile-entertainment platform, which debuts April 6 in the U.S. and Canada.
Quibi is making a big push in a fledgling market amid furious competition between some of the world’s biggest media names for streaming customers. Its hope is it will resonate with a younger audience as an alternative in terms of content approach and delivery.
“This (holding a smartphone) will be the next screen,” said Whitman, the former CEO of Hewlett Packard Enterprise Co. /zigman2/quotes/201998588/composite HPE +4.06% and eBay Inc. /zigman2/quotes/204653455/composite EBAY +2.97% . “This is a whole new era of storytelling.”
Content doesn’t come cheap. “Lighthouses,” the service’s premium videos, will cost about $100,000-per-minute to produce, on par with some of the most expensive shows on TV. Quibi’s other two content categories — “Quick Bites,” stand-alone episodes of reality and alternative programming, and “Daily Essentials,” sports and news coverage — aren’t as pricey.
A turnstile feature gives viewers two perspectives, optimized for vertical (“portrait”) and horizontal (“landscape”) shots. For example, a shot of a sweeping vista plays horizontally, and extreme close-ups are framed vertically. “Two edits are stitched together,” Tom Conrad, Quibi’s chief product officer, told MarketWatch. “This lets directors tell stories in new ways.”
The service costs $4.99-per-month for two-and-a-half minutes of ads, $7.99 without ads. Quibi’s advertisers include Alphabet Inc.’s /zigman2/quotes/202490156/composite GOOGL +1.36% /zigman2/quotes/205453964/composite GOOG +1.35% Google, T-Mobile US Inc. /zigman2/quotes/204659678/composite TMUS +1.98% , PepsiCo Inc. /zigman2/quotes/208744353/composite PEP +3.31% , and Procter & Gamble Co. /zigman2/quotes/202894679/composite PG +0.28%
Katzenberg has secured close to $1 billion in backing for Quibi, winning backing from major Hollywood players such as Walt Disney Co. /zigman2/quotes/203410047/composite DIS +1.60% , 21st Century Fox, Comcast Corp.’s /zigman2/quotes/209472081/composite CMCSA +1.32% NBCUniversal , ViacomCBS Inc. /zigman2/quotes/200340870/composite VIAC +1.05% , and Sony Corp. /zigman2/quotes/208567357/composite SNE +0.03% .
Advertisers and investors see potential in short-form content because that’s where the eyeballs, particularly of coveted millennials demographic, are directed. Mobile-video viewing ballooned to 60 minutes a day in 2018 from just six in 2012, according to eMarketer. Whitman believes viewing times will accelerate as ultrafast 5G networks take hold.
Of course, grabbing the attention of the under-40 crowd won’t be easy. Many of Quibi’s content partners also have development deals with streaming services from Apple Inc. /zigman2/quotes/202934861/composite AAPL +2.39% , Netflix Inc. /zigman2/quotes/202353025/composite NFLX +1.61% , Walt Disney Co. /zigman2/quotes/203410047/composite DIS +1.60% , Amazon.com Inc. /zigman2/quotes/210331248/composite AMZN +2.55% , and others. Those same services boast inexpensive subscription options and mountains of established popular content.
“Can Quibi capture the cultural zeitgeist in such a crowded field? I’m not sure a younger demo is willing to pay much for short-form mobile video,” Andrew Hare, a senior vice president of research at market researcher Magid, told MarketWatch. “I’m not sure their content is in the same universe of a Disney or Netflix. It’s an uphill climb.”
“Plus, [Quibi] is trying to do something that doesn’t exist with an unknown brand,” Hare said. “There is so much competition in streaming already, with [Comcast Corp.’s /zigman2/quotes/209472081/composite CMCSA +1.32% NBCUniversal’s] Peacock and [AT&T Inc.’s /zigman2/quotes/203165245/composite T +1.21% ] HBO Max on the way in the spring.”
Adds Bob O’Donnell, president of TECHnalysis Research: “The number of streaming service choices is going to get overwhelming for most consumers very quickly and that’s going to make it very difficult for smaller names like Quibi, especially if they don’t have known content.”
Because a most of streaming content is at least 30 minutes long and requires a computer or TV screen for viewing, a mobile content platform is a viable option for younger viewers glued to their smartphones, counters Whitman.
“We’re bringing the best of Silicon Valley and Hollywood together to create a different entertainment platform,” said Whitman, who has known Katzenberg for more than 30 years, dating to their time together at Disney. “We’re not a studio, but commissioning studios to make content.”
In short, Whitman and Katzenberg think of Quibi as HBO for 18- to 44-year-old users of mobile devices.
“(HBO) blew the walls off length of content, episodes, standards and practices,” Katzenberg said in an interview in 2018. “We want to do the same online. Narrative storytelling in bite-sized episodes (10 minutes) that is convenient. It is similar to the approach Dan Brown took with The DaVinci Code” with short, punchy chapters, he added.
“I know what I know, and I know what I don’t know,” Katzenberg said. “And I intend to learn what I don’t know from Meg.”
NOTE: This story was updated with funding news on Friday.