the downfall of Quibi has created an interesting counterpoint to the fall of Theranos. Though the companies were situated in very different industries, the Theranos story centers around a young woman who treacherously conned investors, journalists and even some of her own employees, before a small group of rebels gave the story up to the Wall Street Journal, which brough the whole sham crashing down.
On the other hand, Quibi wasn't an illegal scheme; it remains an obviously legitimate business, and it's certainly possible that a rival like Netflix or Hulu might scoop up some of the assets Quibi might be selling after Jeffrey Katzenberg announced plans to shut it down after an abysmal rollout during the pandemic that made the company into a laughingstock. Customers who signed up for Quibi's free trial quickly discovered, much to their eventual disappointment, that there was no way to watch the shows on their laptop, or a TV. Quibi's founders effectively engaged in an act of self-sabotage by ensuring that the smartphone app was the only venue in which their content - the quick "bites" from which Quibi's name is (again, confusingly) derived - could be consumed.
Many seemingly bone-headed decisions about the product, programming and the rollout have been documented by Bloomberg and WSJ (we've added our two cents' worth here and here), but since announcing plans to shut down, Katzenberg and Whitman, who have both been saddled with massive personal losses from the venture, have tried their hardest to project an air of humility and graciousness.
However, that task just got a lot harder, as Bloomberg's Businessweek earlier today published a deeply sourced piece elaborating on the many flaws and failures in Katzenberg's initial vision for the product. Those problems were only exacerbated by the out-of-touch arrogance exhibited by Katzenberg and his partner, Whitman, whom he recruited to the project, according to reports. Viewers who watched Whitman's early CNBC interviews pitching Quibi probably remember cringe-worthy moments, like when she reveals that the company's name is derived from the phrase "Quick Bites", or when she described Quibi as a revolutionary new medium, seemingly without realizing that hilarious short videos, sometimes with scripted plots, have been posted to YouTube for free since the mid-aughts.
Between shelling out $6 million to Reese Witherspoon to do a voice-over for an animal TV program that nobody watched, to Whitman awkwardly placing her newly purchased LA condo back on the market without saying a word to anyone at the company, Bloomberg chronicles many details from a company that was driven into the ground by two stubborn, know-it-all boomer executives who thought their focus-group-backed wisdom was simply beyond reproach.
The Condo Incident
Whitman, one of Silicon Valley’s most powerful women, had moved to L.A. to work with people like that. She’d been recruited a year earlier by Jeffrey Katzenberg, the Hollywood megaproducer who co-founded DreamWorks Animation, who was betting that the future of entertainment was short-form videos with old-school studio production values. Whitman was to be the CEO of a streaming service with episodic programming that aimed to wow a generation raised on YouTube.
But the service, called Quibi, premiered this past spring to crickets and jeers. Over the summer, Whitman talked her team through a retooling plan and acted as though she planned to remain in L.A. for a good, long while. But in early August, less than two years after she bought the Sierra Towers condo, she put it back on the market.
Her staffers noticed. Several circulated the real estate listing, spurring a wave of quiet searches for employment elsewhere. More than one marks that as the beginning of the end for Quibi. “When your CEO puts their L.A. home up for sale less than two years after buying it, that’s when you know the writing is on the wall,” says one former Quibi employee, who, like most of the 24 current and former staffers interviewed for this story, spoke on condition of anonymity to protect future job prospects.
That Song From 'Trolls'
When Katzenberg and Whitman finally broke news of the shutdown to employees, an unexpectedly swift death for a company that had launched its product just 7 months before. As misty eyes filled the room, Katzenberg reportedly encouraged his team to listen to a song from the animated feature film "Trolls" (one of Katzenberg's former projects) to help lift their spirits.
Toward the end of October, Quibi’s seventh month in the crowded streaming market, Whitman and Katzenberg assembled their employees on a video call to tell them the company would be shutting down around Dec. 1. A misty-eyed, apologetic Katzenberg encouraged employees to comfort themselves by playing the song Get Back Up Again from the DreamWorks movie Trolls.
TV On The Internet
In particular, several staffers told Bloomberg that Whitman and Katzenberg insisted on recruiting the most expensive Hollywood talent, instead of relying on cheaper social media stars with established followings among a younger audience that Quibi and its rivals covet. This was perhaps one of the biggest reasons why the company failed so quickly, as it blew its load by paying $6 million for Reese Witherspoon to do a voice-over for an animal show that nobody watched.
Bloomberg apparently saw a pitch-deck slide breaking down salaries paid for some of these "lighthouse" shows and...well...
Several current and former Quibi employees say Katzenberg built himself a punishing schedule. In the weeks after Quibi went live, he’d rise by 3:30 each morning, work out while reading the news from 5 a.m. to 7 a.m., and conduct as many as 20 FaceTime meetings a day, turning most any interaction along the way into an impromptu meeting about the company. He divided show ideas into three categories: the titular “quick bites” (short, one-off videos), “daily essentials” (news programs), and “lighthouse” shows (projects involving A-listers). The latter ate up most of the budget. According to a Quibi pitch deck seen by Bloomberg Businessweek, lighthouse shows generally cost $20,000 to $125,000 a minute, compared with roughly $10,000 a minute for daily essentials. Fuqua’s series, #FreeRayshawn, which stars Laurence Fishburne and Stephan James, cost $15 million for 15 episodes of 10 minutes each, a competitive budget for today’s streaming services. Netflix Inc.’s Stranger Things costs $6 million to $8 million for episodes that typically run for 45 minutes to an hour, and Disney+ is expected to spend as much as $25 million an episode on Marvel shows such as Hawkeye and WandaVision. But in another respect, Quibi sweetened the deals far beyond what other streaming services were willing to offer. Two years in, creators would be free to edit their Quibi shows together into an extended work and sell the longer version somewhere else. After seven years the company’s rights to the short-form versions would expire.
Katzenberg also applied his decades of development experience, something current and former employees say was part of the problem. The 69-year-old former wunderkind often insisted that he weigh in on everything from casting to wardrobe to graphic design, frequently via FaceTime with printouts of his notes next to him. He invested aggressively in somewhat out-there series with recognizable names attached, such as Most Dangerous Game, starring Liam Hemsworth and Christoph Waltz; Dummy, starring Anna Kendrick; and Thanks a Million, a giveaway reality show produced by Jennifer Lopez. To narrate voiceover for Fierce Queens, a wildlife program produced by BBC Studios, Quibi paid Reese Witherspoon $6 million. (Her husband, Jim Toth, was Quibi’s head of content acquisitions.)
Though SJW reporters would like to have the world believe that only men are capable of 'failing up', Whitman just might be moving on from Quibi with a job in the Biden administration, despite her history of...running for office (albeit, in California) as a Republican.
Whitman is an early contender for several cabinet-level positions in President-elect Joe Biden’s administration, according to three people familiar with the matter. Weeks after she put her L.A. condo up for sale, the former Republican gubernatorial candidate appeared during the Democratic National Convention to endorse Biden on national TV. “For me, the choice is simple,” Whitman said. “I’m with Joe.” It’s unclear what Katzenberg will do next, but the producer seems less likely to leave the entertainment industry behind. “One might wonder why sailing off into the sunset on a boat in the Caribbean isn’t an option for Jeffrey,” says Shapiro, the producer of Let’s Go, Atsuko! “But I don’t get the sense he’ll want this to be the last chapter of his storied career.”
It's worth noting that Katzenberg is also a major Democratic bundler, one of the biggest in Hollywood.
Many of her former employees weren't so lucky. Several complained to Bloomberg about feeling 'blindsided' by the shutdown, as Whitman and Katzenberg apparently kept the true enormity of the company's fiscal recklessness from the rest of the staff. In the end, many employees credited Katzenberg and his enormously over-inflated self-confidence, and his micromanaging style, for doing far more harm than good.
In the end, some $2 billion of investors' money was wasted. But at least Reese Witherspoon managed to secure a pretty generous payday.