Quibi’s Failure Threatens to Erase Some Lessons for the Streaming Industry
Quibi is finished.[1] Explanations abound for the nascent mobile streaming platform’s demise, from blaming the COVID-19 pandemic to it just not being that good of an idea.[2] Regardless, it seems certain that there are lessons the streaming industry as a whole will take from Quibi. For example: it maybe isn’t the best idea to intentionally limit where your customers can engage with the content they pay for, even if the purpose is to tout your platform’s marquee technology.[3] This lesson is especially relevant when you’re accused of patent infringement for the aforementioned technology.[4] But taking those types of lessons—the ‘hey don’t do this’ kind—from such a high-profile failure might be the easy part. The real challenge could lie in trying to figure out where Quibi succeeded, or might have succeeded given time, and why.
Before owner and founder Jeffrey Katzenberg announced the decision to shut Quibi’s doors forever, there were widespread reports that he and CEO Meg Whitman were exploring a sale.[5] No one wanted to buy.[6] Not even Apple, which has recently made its own foray into the streaming industry, was interested.[7] Why? Because Quibi doesn’t actually own many of the shows that appear on its platform.[8] Most of Quibi’s content was produced under the condition that the creators retain ownership rights.[9] Quibi would then get an exclusive license to the content for two years, after which the creators would gain ownership over the long-form version.[10] Five years after that, all ownership rights would go to the creators.[11] This strategy was to encourage rapid and robust support from the premium Hollywood industry professionals that Quibi hoped to leverage into a successful launch.[12]
In some ways, this strategy seems to have paid off. Quibi was able to draw an impressive collection of high-profile Hollywood talent to create shows for its platform.[13] Though none of the shows turned into a hit that might have saved Quibi from its early grave, that isn’t relevant in determining whether their ownership strategy was prudent. Quibi offered the deals, and the stars signed.[14] It’s not difficult to imagine why, either. Increasingly, creative professionals are putting a premium on owning the things they create. In the music industry, many expressed support when Taylor Swift tried to gain ownership of her masters – the original recordings of her songs.[15] The streaming industry is dominated by established media companies with vast libraries of intellectual property to rely on.[16] This strategy might have been the only way for a startup like Quibi to compete on content.
One of Quibi’s fundamental failings was that it tried to inhabit a strange niche in the market somewhere between TikTok and Netflix.[17] In a world where Quibi had truly tried to compete with the Disneys of the world (and didn’t fail spectacularly), how would the industry have responded? It’s entirely possible that incumbents would have changed their practices to adapt to the new competition, either by adding new incentives for creators to produce content for them, or by adopting a version of its licensing model. A robust secondary market could have existed, where streaming services bid for the new licenses for creators’ work once their initial contracts expire. Considering HBO Max’s willingness to pay upwards of $400 million for the exclusive rights to Friends, this seems like a lucrative prospect for creators.[18] It remains unclear if this would have been a good thing for consumers, who experienced licensing whiplash in July from the Harry Potter movies simply moving from one service to another.[19]
Endless speculation is possible for what might have happened if Quibi was a true competitor, which is why it’s so unfortunate that it wasn’t. The opportunity for a new entrant to truly shake up the industry anytime soon may not come again. Part of the reason Quibi could take risks and raise money effectively was because founder Jeffrey Katzenberg was a Hollywood insider with years of experience.[20] Others who are similarly situated may be hesitant to take the leap after seeing what happens when you fall.
Footnotes
