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Two veteran CEOs risk $1.8 billion on an app. In a pandemic.

Jeffrey Katzenberg and Meg Whitman are sticking to the Monday launch date of Quibi, an ambitious short-form video app, right in the middle of the global coronavirus crisis

By Nicole Sperling
Published: Apr 6, 2020

Two veteran CEOs risk <img.8 billion on an app. In a pandemic.Quibi CEO Meg Whitman (R) and Quibi founder Jeffrey Katzenberg speak about their short-form video streaming service Quibi during their keynote address January 8, 2020 at the 2020 Consumer Electronics Show (CES) in Las Vegas, Nevada. (Image: Robyn Beck/AFP via Getty Images)

LOS ANGELES — They had to cancel the premiere party. But Jeffrey Katzenberg and Meg Whitman have stuck with the Monday start date of Quibi, the short-form video app for smartphones that they hope will attract millions of subscribers.

After having led some of the nation’s top companies for decades, the two veteran executives have spent the last two years in startup mode, prodding investors to kick in nearly $1.8 billion while courting producers and stars like Jennifer Lopez, LeBron James, Chance the Rapper, Idris Elba, Bill Murray, Steven Spielberg and Chrissy Teigen. Now Katzenberg and Whitman are ready to unveil their ambitious venture right in the middle of a pandemic.

“This is either going to be a massive home run or a massive swing and miss,” said Michael Goodman, a media analyst at Strategy Analytics.

Quibi, a portmanteau of “quick bites,” will offer movies, reality shows and news programs made for the smartphone, with no installment clocking in at more than 10 minutes. The offerings fall into three main categories: movies that will be released in chapters; documentaries and unscripted reality shows; and quick-hit news and sports reports from NBC, BBC, ESPN and others. Fifty shows will be available Monday.

Before the spread of the coronavirus, whenever Katzenberg and Whitman made their Quibi pitch, they described it as an on-the-go diversion for anyone standing in line at Starbucks or riding the subway. The pandemic changed the context. With potential customers largely confined to their homes, it will now go up against established platforms like Netflix and Amazon Prime Video that can be watched on any screen, including the living room TV. Quibi works only on the phone.

Whitman said she wasn’t concerned about the crisis’ effect on the startup’s chances.

“Think about how often you use your phone when you’re homebound,” she said. “People who are home with their children would really like a 10-minute break.”

There is also the question of how much people are willing to spend on streaming at a time when nearly 10 million are out of work. Entertainment options have also expanded while Katzenberg and Whitman were building their app with 267 employees in an open-floor office in Hollywood. The Walt Disney Co. and Apple joined the streaming party in November, with Disney Plus and Apple TV Plus, and TikTok, filled with short homemade videos, had a spectacular rise, hypnotizing the young viewers Quibi hopes to attract.

Under those circumstances, Quibi (rhymes with “libby”) announced last month that it would be free for its first three months. After that, the cost will be $5 a month with ads and $8 without. Shortly after the announcement of the introductory offer, the company canceled its premiere party, which was expected to draw 150 celebrities among its 1,500 guests, because of the pandemic. But delay the launch? No way.

“Given the quality and quantity and convenience of Quibi, we think it comes at a time when people are looking for relief, looking for distraction and looking to escape,” Katzenberg said. “Those are all the things we are trying to deliver to them.”

Katzenberg, 69, and Whitman, 63, have dived headlong into a challenging third act, creating a product geared to people half their age at a time when millennials and Gen Z-ers have taken to needling their elders (see “OK Boomer”).

The head of Walt Disney Studios at the time of the original version of “The Lion King,” Katzenberg has often gone against the grain. Passed over for the No. 2 job at Disney in 1994, he built a rival conglomerate, DreamWorks SKG, with Spielberg and David Geffen. He also waged a legal battle against his former employer, saying he had deserved more compensation. The bitter, headline-generating fight concluded with Disney handing him a settlement estimated at $250 million.

DreamWorks faded, but DreamWorks Animation, the spinoff run by Katzenberg, survived until 2016, when Comcast’s NBCUniversal bought it for $3.8 billion. As part of the deal, Katzenberg received a $420 million payout — and reluctantly stepped aside.

In the back of his mind was a failed initiative similar to Quibi:, a side venture he had started in 1999 with Spielberg, Brian Grazer and Ron Howard as a venue for video shorts. It went bust before it even launched.

Quibi’s other leader, one of the country’s most powerful female executives, rose through the ranks of U.S. business at Disney, DreamWorks and Hasbro before she took eBay from a shop with a staff of 30 to a global powerhouse with 15,000 workers and $8 billion in annual revenue. When she left, in 2008, she was a billionaire.

She went on to spend more than $100 million of her fortune to run as a Republican for governor of California, only to lose the 2010 election to Jerry Brown. A return to business put her in charge of Hewlett-Packard, which she left in 2017.

“I’ve been working straight for 35 years,” she said upon her departure. “I’m going to enjoy some downtime.”

But she soon joined Katzenberg at what was then called New TV, after he had raised $1 billion from Hollywood studios, the Chinese e-commerce giant Alibaba and other investors.

“She doesn’t like this, but I keep saying we’re two old dogs who have a new trick,” Katzenberg said at the time.

Whitman left her home in Northern California for a West Hollywood high-rise. Now she can see Katzenberg’s house in Beverly Hills from her bedroom window.

Startups rarely run smoothly, and several prominent executives have left Quibi over the past year, including Janice Min, the former co-president of The Hollywood Reporter-Billboard Media Group; Diane Nelson, a former Warner Bros. executive; and Tim Connolly, a former Hulu executive. Katzenberg and Whitman are known as exacting managers who keep an eye on the tiniest detail.

The company has also had trouble getting the word out. Although Quibi spent millions on commercials that ran during the Super Bowl and the Oscars, 68% of participants in a Morning Consult/Hollywood Reporter poll last month said they were not familiar with the brand.

“Part of the reason awareness is so low is they are building a new name,” said Ross Benes, a video analyst at eMarketer. “Quibi takes time to explain. It’s not super clear that this will cost you $5 a month and you’ll get a lot of short videos.”

Stay-at-home mandates have complicated the rollout, with meetings held via video conference.

“Even though Zoom is great, I can’t really read the body language in the room,” Whitman said. “And that has always been an important part of how I gauge who is doing what to whom and how things are working.”

Katzenberg and Whitman had an easy time making deals partly because of the terms they offer: The company pays for production costs and licensing rights, allowing the creators of Quibi programs to retain copyright, meaning they can sell their work to another platform or network after a set number of years.

Nicole Clemens, president of Paramount Television, received an offer from Quibi for “When the Streetlights Go On,” a script about the aftermath of the murder of a suburban teenager that had once been shot as a Hulu pilot.

“It was an incoming call,” Clemens said, “which is always nice to get.”

The Quibi version will be part of the Monday launch.

Writers who sign on have to follow a rule of Katzenberg’s: They must end each installment with a cliffhanger. Nick Santora, the writer of “Most Dangerous Game,” an action film starring Liam Hemsworth and Christoph Waltz, described hitting those marks as “hard but exhilarating.” To pull it off, he refashioned his 48-page pilot script, initially written for NBC, into a 150-page screenplay with a climax every 10 pages.

“When you’re writing a regular script, and you need a scene to tell a certain arc in your story, and it takes 12, 13 pages, it’s no big deal,” he said. “You can’t do that in Quibi. Once you get to page 10, you’re done.”

Quibi intends to set itself apart from YouTube, the leader in short-form digital video, because of its reliance on an old-fashioned Hollywood hallmark: production values. Quibi films cost up to $100,000 per minute. And Katzenberg’s long experience has taught him how to handle the talent, even as his reputation as a relentless boss holds firm.

“You don’t always hear from the biggest exec at the company,” said Ryan Case, director of “Flipped,” a comedy starring Will Forte and Kaitlin Olson. “But he called me, the writers and the cast members on a Saturday at our homes to say he was excited. It was both wonderful and classy.”

Unlike Disney Plus, which gained subscribers on the strength of its “Star Wars” series, “The Mandalorian,” Quibi hopes to lure viewers with its overall lineup.

“I think we have fantastic shows,” Whitman said, “but I also think it’s the sum total of what we are offering, as opposed to one ‘Mandalorian.’”

The companies making a line of Quibi programming called Daily Essentials have faced the toughest challenge. Madeleine Haeringer, an NBC News executive producer, spent months assembling a 50-person team able to produce twice-daily 5- to 7-minute news programs. Her job got trickier when employees were forced to work from home. A week before the start date, she delivered test episodes remotely, with anchors on iPads.

“It’s incredibly daunting,” Haeringer said.

Quibi’s unscripted shows bring to mind cable fare and syndicated programs. Teigen’s “Chrissy’s Court” is the app’s answer to “Judge Judy,” and Lopez produces a show that follows celebrities as they give $100,000 to someone who meant a lot to them.

Will Quibi be the next digital thing or a flop? That is the $1.8 billion question.

“On the plus side, Quibi is like nothing else,” said Goodman, the media analyst. “On the other hand, while we know that there is a tremendous amount of video being consumed on phones, we also know that people don’t want to pay for video on their phones.”

Katzenberg and Whitman say they will beat the odds. Noting Quibi’s debut slate of movies in chapters, Katzenberg said, “All five of those I think are great. Not good. Great.”

Whitman sounded more circumspect.

“This is very different from a movie launch,” she said. “We are building a new consumer product.”

©2019 New York Times News Service