Like this episode? Join host Kinsey Grant for a live watch party and discussion on Monday at 5 p.m. ET on Twitter at @bizcasualpod.
Today, the world gets its first glimpse of Quibi, the short-form mobile video platform as famous for its high-octane leadership as it is for its $1.75 billion in pre-launch venture funding.
Also today? Business Casual listeners get an exclusive interview with Quibi CEO Meg Whitman. In this conversation chock-full of insight, Whitman explains how Quibi is straddling the line between competition for time and competition for dollars.
As a veteran tech leader (and the former CEO of both eBay and HP), she has plenty of inside-baseball analysis about playing into the trend of our dwindling attention spans instead of resisting it. Whitman also explains to Business Casual…
Plus, Whitman defends her claim that Quibi, a video streaming service, is not entering the streaming wars. Want to understand that one? Listen now.
Note: Business Casual transcripts are generated using speech recognition software and human transcription. They may contain errors, although we do our best to avoid them. Please check the corresponding audio before quoting a transcript in print. Questions? Errors found in a transcript? Email email@example.com
Kinsey Grant, Morning Brew business editor and podcast host [00:00:08] Hey, everybody, and welcome to Business Casual, the podcast from Morning Brew, answering your biggest questions in business. I'm your host and Brew business editor, Kinsey Grant.
Kinsey [00:00:17] And now, let's get into it. Are you at home right now, struggling to decide what to watch as you work? Are you one of the Americans who streamed 85% more minutes of video in March 2020 than March 2019, according to new Nielsen data. Well, do we have the interview for you! I'm not going to bury the lead here. Today I'm speaking with the revered and acclaimed Meg Whitman, the CEO of Quibi. If you've been reading [chuckles] Morning Brew for any part of the last year, you probably know what Quibi is—a short form mobile video platform. Short for quick bites—as in quick bites of video. No content is longer than 10 minutes. The cost: $7.99 per month or $4.99 per month with ads. It launches April 6. And we're recording this episode just a few days before that launch.
Kinsey [00:01:02] But the hype surrounding the launch of this service can only be compared to Rihanna releasing a new album. Everyone in Silicon Valley, Hollywood, and Wall Street are watching closely to see how and if Quibi works, because we've got a lot of places out there to find video to stream these days. Quibi’s value prop to investors, who have poured a ton of money into the company before it's even launched, is that this is designed for idle time, the kind of time we'd usually spend scrolling through Instagram or Twitter, what have you. But, it also doesn't hurt that Quibi has recruited an A-list lineup, everybody from Steven Spielberg to Chrissy Teigen, Bill Murray to Sophie Turner, and so many more. But, there are challenges. Quibi's content, at least for now, is original.
Kinsey [00:01:41] There's no vault of movies like Disney Plus could fall back on. And there are still a lot of questions surrounding Quibi's finances. And most certainly, there's competition. So today, Business Casual is going straight to the source. The CEO, Meg Whitman on Business Casual—words that I am very excited to say. Meg, thank you so much for joining me today.
Meg Whitman, CEO of Quibi [00:02:00] Yeah, happy to.
Kinsey [00:02:01] I know that you are probably in high demand these days, especially, like I mentioned [laughs], just a couple of days before the big launch. But I also mentioned at the top that you are a highly respected leader in the corporate world, in general. You led eBay for about 10 years and during your time there took it from $5.7 million to $8 billion in sales as CEO, which is incredible. And that was just the first feat of many of your career so far. Also, the CEO of Hewlett Packard from 2011 to 2015, oversaw the split from HP Inc and Hewlett Packard Enterprise. Then after leaving HPE, became the CEO of what was, at that time, a fledgling Quibi in April 2018. So that's kind of the highlight reel in the past couple of decades. So, you know, we are excited to have you here on Business Casual.
Kinsey [00:02:48] And I want to help to explain to some of our listeners why we've been talking about Quibi so much, because we've done episodes before on Business Casual on the streaming wars and on media in general and ask some media-related questions. But I think that this is one of the first times we're seeing some really, I don't know, just trying to experiment with something different in terms of format and in terms of technology and content as well. So I want to try to get to the why, the how, the what of Quibi. And hopefully we can get through all of that in this conversation.
Meg [00:03:19] Sounds great.
Kinsey [00:03:20] All right. Let's just jump right into it. So we'll talk more about some of the details of Quibi and the launch that's coming up in a couple of days as well. But let's kind of start here with the why. We have Netflix, Hulu, Disney Plus, Apple TV Plus, Amazon Prime video. Soon there’ll be Peacock from NBC and from AT&T you’ll have HBO Max. There's also YouTube and Instagram's IGTV to compete with. What makes Quibi a necessary addition to this long list of streaming services and video consumption platforms that are out there?
Meg [00:03:50] Well, good. Great question. So there is a long history in Hollywood of technology enabling a new form of storytelling. Think about the motion picture camera that preceded the first silent film. Think about television. The television set that technology preceded a whole new way to tell stories in television, in TV. And we think that the cell phone that you probably have in your hand right now is a fantastic device. I mean, think about it. It's changed everything in the last 10 years, but only in the last five years have you been able to watch video on that sound thanks to the new Qualcomm chip. And today, watching video on your mobile is good. We think it can be fantastic and will enable a whole new form of storytelling.
Meg [00:04:31] So as you said upfront, we are combining the best of Hollywood and the best of Silicon Valley to create a whole new entertainment experience designed exclusively for mobile. So the only place you can watch Quibi is on your mobile. And as you said, it's in these short, quick bites. We have movies that are full-length movies, but they're told in 10-minute chapters. So it's completely different. We don't actually, for the most part, think we compete with a Netflix or a Hulu because you watch those mostly on your TV. This is designed for your mobile phone.
Kinsey [00:05:00] So do you view Quibi as the kind of technology that would open up the door for future competitors that are mobile-first and mobile-only?
Meg [00:05:07] Well, listen, we think if we're successful, what we will do is create a whole new form of storytelling that is designed for mobile, which means if we create a new category, there'll be lots of competition over time who will jump in behind us if we've created this whole new way to experience content on your mobile. So we're all about, actually, new category creation. And when you do that, obviously, there's advantages around first-mover advantage. All the major Hollywood studios are our investors. We've gotten some patented technology that enables you to see full-screen video landscape to portrait. So we think we've got some competitive advantages. But I suspect if we're successful, they'll be a lot of competition.
Kinsey [00:05:48] Is there any way to pinpoint the timeline for when that competition would enter the field?
Meg [00:05:52] I don't know. I think a lot of people are waiting to see how we do. And I think if that competition comes, it will—it's hard to do what we've done, actually, because we really are combining Hollywood and Silicon Valley. You think about it, most of companies today in the streaming business were tech companies who tried to become content companies or content companies who are trying to become tech companies. We started doing both at the exact same time, and we think it gives us some competitive advantages. And the way we have really thought about this is we put our technologists next to our creative development team from day one.
Kinsey [00:06:27] Are you a content company or a tech company?
Meg [00:06:29] We’re both.
Kinsey [00:06:30] Is that a fair answer?
Meg [00:06:31] Yeah, I think so. I mean, that's been the idea from the beginning. That on equal footing—technology and content—and the two reinforce each other. And, you know, think about it—for a long time, the content folks were completely separated from the technology team and vice versa. And today, this is from the beginning seamless. You know, how is the content shot? How is it going to be rendered on the phone? And what how do you take advantage of all the things the phone has, GPS, gyroscope cameras, sound, all the things that can make the content quite special and different on Quibi.
Kinsey [00:07:07] So trying to become both a content company and a tech company starting from scratch, basically, with this new technology and new content, is a massive undertaking for a lot of companies. And it's something that, you know, you think about Morning Brew. We are a content company. We've started to work more in tech, but we're always going to be content first. What do you think enabled Quibi to be able to marry these two very different aspects of the company at one time? It’s not necessarily easy.
Meg [00:07:31] No, I think you're exactly right, because content creators tend to be right brain storytellers and technologists tend to be left brain analytical thinkers. So I think in some ways it is embodied by our team, which Jeffrey Katzenberg is responsible for—the creative part of our company—and I'm responsible for the technology and, obviously, the overall CEO. So it is embodied in many ways; how Jeffrey and I work together is how the whole organization works together. And so part of the magic is the ability to combine someone who has been in Hollywood for 40 years, who knows content up, down, inside out and has all the relationships in Hollywood with someone who knows the technology world and also financial architecture and strategy and advertising sales and, you know, making sure that we have the right business plan that investors were willing to underwrite.
Kinsey [00:08:22] How many people do you employ right now?
Meg [00:08:23] About 255.
Kinsey [00:08:24] And what's the split between them? Content versus tech?
Meg [00:08:28] Yeah, it's probably about equal, about I'd say about 90 folks on the content side, about 90 folks on the product and tech side. And then the rest is advertising, sales, marketing, HR, finance, legal. So it's interesting that you ask because the content team and the tech team are about the same size.
Kinsey [00:08:46] So it sounds like you've really merged these two different parts of business together into one cohesive unit. I'm curious who you think your biggest competition is in doing that.
Meg [00:08:56] Yeah, well, I don't think anyone's done anything quite like what we are doing. I can give you an analogy for the content in another medium. Part of what we're doing is movies and chapters. And so our movies are, you know, an hour-and-a-half, two-and-a-half hours long, like a regular movie, only they are told in 10-minute chapters. And when people hear that, they said, well, how's that exactly going to work? And I'll give you an analogy. As I said, another medium, “The Da Vinci Code.” You might recall, “The Da Vinci Code” was 464 pages and 105 chapters. Every chapter in “The Da Vinci Code” is five pages long. I would argue there's nothing lesser about “The Da Vinci Code” from a storyline, a plot, a drama, romance, etc.
Meg [00:09:36] But when Dan Brown wrote that book, he said, I don't think my readers have 30 minutes anymore or even 45 minutes. So I want them to read—I want them to be able to get through a chapter in a single sitting. So if they have five minutes, I want them to read one chapter. If they've got 10 minutes, I want them to read two chapters. So we sort of took that from a movie perspective. And that's not the only kind of content we have. But we took that and said, OK, could we do movies like Dan Brown did “The Da Vinci Code”? And, you know, many James Patterson and many, many others have done it since then.
Kinsey [00:10:06] You bring up this concept of attention, which is enormously important not only in media, but in any new consumer product that's being put out there. We have a finite amount of attention as human people. Our attention spans are also notoriously short and getting shorter, day by day. So do you think that that Quibi is contributing to that problem or is helping to just satiate what is already there? And what likely was on its way for some time?
Meg [00:10:31] I think we're developing into a trend. I mean, what we know is people spend a tremendous amount of time on their phones. They're watching a lot of video on their phones. It was just six minutes a day in 2012, and 2018 it was 60 minutes a day, in 2019—it's likely to be that data isn't in yet, but 80 minutes a day. So we're gonna give people, you know, a different alternative for how they're spending their time. And listen, you know, I think we are. We decided that we wanted to be for your in between moments and before corona, you know, you're on a commute. You're waiting in the line for a cup of coffee at Starbucks. You're waiting for a meeting to start. You're in a doctor's office. You're waiting for friends for lunch. Think about it. There's all these 10-minute in between moments you have during your day. And we thought, OK, that would be actually a great consumer use case to target. So that's how we came up with it. Now we'll see how it works with corona.
Meg [00:11:23] A lot of people have said they're working at home, you know, like you are. And maybe you do have 10 minutes doing the day. You're not going to take an hour-long [indistinct] during the day to watch an hour-long show. But you might have 10 minutes during—in between interviews like this—for a break or something like that. And so we're gonna see how the in between moments [indistinct] work and corona—what a lot of our working moms have said, and working dads, when they're at home, they're saying, you know, we're homeschooling the kids. We need a ten-minute break. So we'll see. [laughs]
Kinsey [00:11:50] OK. And I want to talk more about the impact that we think coronavirus and a pandemic in a recession at the same time have on the business and the launch in general. But before we get off of this topic of competition and attention—the concept that Quibi is bringing to the table is certainly new, but the concept of filling 10-minute spans of your time with something on your phone is not necessarily new. I would say you are getting that first mover advantage as we consume more video on our phones, but we still have things like scrolling Instagram and Twitter. So who do you think is a bigger competitor right now? Is it the Instagrams and Twitters or is it a YouTube or a Netflix mobile app?
Meg [00:12:25] So I divide it into two. I think there's competitive for competition for entertainment dollars. And then there's competition for time. Competition for entertainment dollars—I think we compete for whatever you spend money on entertainment, you know, which as I said before, the most recent situation was movies, sporting events, other streaming services, etc., for sure. For time, I think it's whatever you do on your phone during the day, which is, you know, people play casual games, they communicate and collaborate. They do their social networking, they watch YouTube. So I think we have to—I think we will grow the amount of time that people spend watching video on their mobile, but probably inevitably, maybe we'll take a little share from whatever else one does on their phone during the day.
Kinsey [00:13:10] So we were talking, as I can [indistinct] here, about coronavirus and the impact of COVID-19 on this launch. There were some whispers, before we were talking here, that you guys might push the launch, that you were considering it. I don't know whether or not those are true, but you are still going ahead with this launch on Monday. What has been the impact of a global pandemic right before you're getting ready to launch a product that's been in the works for years now?
Meg [00:13:36] So we did think about it. I think everyone has to re-evaluate their business. And in this time, I mean, everything is different. I mean, no one has seen anything like this, honestly. You know, since really maybe well over a 120 years ago or a 100 years ago. So the first thing we had to think through was, you know, could we still launch? And the answer is yes, we can. You know, the great news about technology today is we're being built in Google Cloud with some services in Amazon Cloud. So we don't have a data center. And so we just launch right into the cloud and our engineers can do that from their homes. And so that's not a technical problem. The next question we have to ask ourselves is, do we have enough content, because maybe the studios don't get back up and running until early or mid-summer.
Meg [00:14:20] We actually banked a lot of content when we were making content for Quibi. All of the content on Quibi is new for us because it's made for mobile. And it's, as you pointed out, we don't have a library. Everything is made new for Quibi. So the good news is we banked a lot of content because we just didn't know how much people would consume. And in the early days, Jeffrey and I said, listen, we've got to have nine months’ worth of content when we launch. And so we have enough content to get us through mid-September, even depending on a release schedule, even as long as Thanksgiving. So we said, OK, we can. And then the question was, should we?
Meg [00:14:55] And, you know, we're not first responders. We're not physicians or healthcare professionals. We're entertainers. And the mission of the company is inform, entertain, and inspire. And we said, you know, could we bring a little joy to people, a little levity, something that brightens their day in these tough times, and we said, you know, maybe that's our role here. And so we decided to go ahead.
Kinsey [00:15:15] Does the current state of affairs on Wall Street make you nervous in any way or has the money raising already done?
Meg [00:15:22] The money raising has already been done. So we're well-funded, for sure. And that was important. We've finished our second round of fundraising on February 28. So that was actually —
Kinsey [00:15:36] Perfect timing. [laughs]
Meg [00:15:37] Yeah, yeah. And listen, you know, I think that the economic hardship that this situation is going to create is immense. I mean, I think you probably saw today, I think 6.5 million people have filed for unemployment insurance. I suspect that number is going to go up. So, I think we were quite thoughtful about what it means to charge for Quibi. If you sign up for Quibi by the end of April, you get 90 days free. And that was a change we made in the context of the coronavirus. So, at least for now, through July 6, if you sign up before the end of April, you get 90 days free and you get a chance to try it. [indistinct talk] That was one thing we could do.
Kinsey [00:16:22] [indistinct] could do before launch if you signed up. You got 90 days free. Correct?
Meg [00:16:25] Well, no, originally it was two weeks free.
Kinsey [00:16:30] Oh, OK.
Meg [00:16:30] So whenever you signed up, it was two weeks free. And then we said, if you signed up in the first two weeks, you'd get 90 days free. And then we just extended it to the end of April. If you sign up by the end of April, you get 90 days free. So it's been a little bit of a moving target, target since corona. The original, original plan was whenever you sign up, you get two weeks free—two-week free trial.
Kinsey [00:16:49] I feel like moving target is the theme of this corner. [laughter] OK. Meg, thank you. We are going to talk more about all of the business implications in just a second. But really quickly, let's take a short break to hear from our sponsor. — And now back to the conversation with Quibi CEO Meg Whitman. We just sort of started scraping the surface here in terms of pricing for Quibi. So like we mentioned, $4.99 per month, if you do have ads, $7.99 per month without ads. Explain to me more the process of landing on that pricing, exactly. Because it's less than the typical Netflix tier that most people have. But it's also about on par with some of the other streamers that have recently launched products.
Meg [00:17:30] Yeah. I mean we, you know, there's not usually just a ton of science around pricing. You look what other services are charging. You say, where do we want to be for the fact that we're a new brand and a new service and we want people to try it? And we thought the 4.99 price with ads was a very attractive entry price point. And the good news, is we have some of the best advertisers. We have 10 advertisers who are our launch advertising partners for year one, and they're brands like Google and AB InBev, which is Anheuser-Busch, Pepsi, Progressive, General Mills, etc., you name it. And they are some of the best brands, and they are doing ads that are also in what we call Turnstyle—the full-screen video landscape to portrait. So they were excited about creating ads in a whole new format for the ability to reach this millennial audience in their, you know, on-the-go moments on mobile.
Meg [00:18:25] And, by the way, we think about 75% of the people will pick the ad-supported version because it's just one 15-second pre-roll in front of every piece of content we call our piece-of-content Quibis. So just one 15-second nonskippable pre-roll in front of a Quibi. There's no interrupting the episode that you're watching for another ad, and so our advertisers were pleased with that and we think our users will be as well. So who knows how this will all work? But we think that because the ad load is so light—if you were to watch an hour of Quibi, it's just two minutes of the whole hour, which is significantly less than broadcast TV or many of the other streaming services. So we think that a lot of people will pick the ad-supported version because of the nature of the ads and the price point.
Kinsey [00:19:12] Did you ever consider doing something more like a Netflix, where there are never ads, you just pay more money for it?
Meg [00:19:18] We thought about it, but we were also inspired by a couple of things. One is, many, many of these streaming services do not accept ads. You know, Hulu does, and Peacock will, but many others do not. And we thought that—and our advertisers said, listen, we're quite worried because a lot of these streaming services aren't allowing ads. And so, if you can help us create a new ad platform that works for us, works for consumers, and works for Quibi, we think this could be a big opportunity for you.
Kinsey [00:19:48] I'm curious to hear your perspective about these large-scale partnerships, like with T-Mobile. So basically, there are a lot of ways now, not only with Quibi, but also with other streaming platforms that have launched, to get access to this content for free. If you have, you know, for Apple—if you've bought an Apple or registered an Apple product in the last year, you get it free for a year. That's how I use Apple TV Plus. How do you feel about this? Does it ever tarnish kind of the shine of the product? If people are on a large scale getting it without paying for it?
Meg [00:20:17] Well, we felt that we wanted to have a distribution partner who would offer it for free to their users, just like Disney did with Verizon. And because remember, in the early days, particularly for a company like Quibi, we want to get people to try Quibi. And, you know, we can do that certainly on our own. But we thought T-Mobile was a really great fit for Quibi because they are very millennial-focused. They have a very diverse audience. We think our audience will be very diverse. You know, the millennial audience in this country is the most diverse in American history. And so we wanted to join up with a company who had a customer base similar to what we thought ours would be.
Kinsey [00:20:56] OK, let's talk here a little bit more about the money that Quibi raised before launch. This is something that has been talked about endlessly in the business news media about the 1.75 billion in fundraising total that you guys got before the launch start—before the launch was, you know, I think you said what February 20th was when you finished that that last round. I know that raising money in any capacity puts pressure on a company and on the company's leadership, but not very many raise that much money before even having a product on the market. Explain to me more the pressure that you feel, if you do feel under pressure, with that many dollars riding on your success or your failure.
Meg [00:21:37] Well, listen, you know, we obviously feel very responsible to our shareholders and to deliver a product and a business that is successful for them. The reason that we felt that we needed to raise the money that we did is we are making a lot of content. As you described, this is a whole new idea. And so what we need to do is when you come to Quibi, you need to feel that there is a rich array of this new kind of content that's been enabled by technology. So we launched with 50 shows. In year one, we’ll create 175 different shows, and there's a part of our content that is what we call Daily Essentials, which is a new show every single day. At the same time, we'll be releasing episodes of our movies every single day, and episodes of our alternative, unscripted and documentary series every day.
Meg [00:22:25] So there's a tremendous amount of fresh content every day on Quibi. In fact, it's three hours of fresh content a day, which is more than most networks release in primetime every day—and we do it 365 days a year. So to make that amount of content, obviously we needed to raise a significant amount of money, and then we obviously have to tell the world about it. So we feel, you know, we obviously feel responsible. And we wrote a business plan that we spent six months writing and we felt like that was a business plan that was very reasonable. We're very focused on getting to profitability.
Meg [00:23:01] Jeffrey and I've been around for so many years, we know that in business, ultimately revenues need to be greater than costs. [laughter]
Kinsey [00:23:11] Can you say that one more time for the people in the back? [laughs]
Meg [00:23:13] Yeah, exactly. You know, people go, well, yeah, of course. But, you know, sometimes, folks forget that. So, we've been in—we've run big, profitable businesses for most of our career. And so we're very focused on time to profitability. So we feel a lot of responsibility.
Kinsey [00:23:31] Okay. I have a couple of questions with that. First and foremost, did the investors interact with a Quibi beta product before they put money in?
Meg [00:23:40] No. They did not. Because when we were raising money, the first money that we raised in August of 2018, we actually had no beta project. We did not have technology. We had no shows that were commissioned. They had to understand the concept. And, you know, trust that Jeffrey and I would deliver a good product.
Kinsey [00:23:58] You guys must make one hell of a pitch deck. [laughter] All right. So next question. Do you have any idea of the timing for this path to profitability? Any sense of when that might happen?
Meg [00:24:10] Yeah, we haven't talked about that publicly, but it’s on both Jeffery’s and my time horizon. And so, you know, we want to get to profitability in a reasonable amount of time. And so we'll probably say more about that after we launch. It's just, you know, it's hard to say that publicly because you don't know exactly how you're going to launch. But, we feel confident and we have enough money to get us virtually all the way to profitability.
Kinsey [00:24:36] Yeah, that would be my next question—what does your kind of runway look like right now? Yeah. [indistinct] putting out content at the same pace that you are getting into launch with.
Meg [00:24:44] Yeah. We've got a nice long runway, and you can imagine that, when we created the financial architecture and raised the money, we were quite conservative about the length of time we had to get to profitability and the amount of runway we had, even if we had to make some changes to the business. One of the things we don't know about content is are people going to be more excited about the Daily Essentials, where they get everything you want to know and why it matters. Every single day, from news to weather to sports to talk shows, to, you know, gaming news, or are they getting more excited about the documentaries and alternative shows or are they going to love the movies in chapters or all three? And that, of course, will ultimately drive how much money we need to spend on content, because you can imagine—the movies are our most expensive kind of content to create.
Kinsey [00:25:31] Right. You're giving me these perfect segues. My next question is, how much, on average, does it cost per minute to create content for Quibi? Does it change from, say, movies to the Daily Essentials?
Meg [00:25:38] It does. Yes, it does. And we've been [indistinct] public. We say we will pay up to $100,000 a minute for our movies and chapters. And today, 95% of content made for television and movies falls in that range. And the other thing for creators that's important to know is, creators own their own IP. And so, what we do is we pay for the cost of production plus a 20% margin. Then we license it to Quibi in its short form for seven years. And then at the end, the content creator owns their own IP, which is very different than virtually every other place they could go to work in Hollywood today. And I think that's part of the reason that we had the lineup of stars and producers, directors, writers that we have, is that this is a really attractive financial deal for them. But they're also super-excited about creating for a new screen, a new medium.
Kinsey [00:26:32] So if they eventually age out of this contract, they get to take their IP elsewhere.
Meg [00:26:35] Yep.
Kinsey [00:26:36] Ostensibly, the movies would make sense because they'll be full length. What about some of these Daily Essentials-type things? If they're created for, say, a four- to seven-minute bite? Is that going to be marketable outside of just Quibi?
Meg [00:26:49] The Daily Essentials—probably not as much. Certainly the news shows and, you know, gaming and weather and celebrity news and things like that, probably not so much. But, you know, Rotten Tomatoes is doing a show called “Fresh Daily,” which is a show about what movies and television and streaming shows you should go watch. Do you remember Siskel and Ebert, you know, a little bit of that. That's a concept and a brand they could take with them. And then much of our talk shows could all be taken with Rachel Hollis—we'll have a whole library of her talk shows. Shan Boudreau—we’ll have a whole library of her talk shows. So those will be valuable. Probably the perishable products of news, sports, etc., will not be as valuable in a second window.
Kinsey [00:27:35] Right. Interesting—the concept of creating almost platform-specific content, but platform-agnostic brands that you could take elsewhere if you needed to.
Meg [00:27:44] Exactly right.
Kinsey [00:27:45] So let's talk more about these ads. We touched on them a bit. You were talking about the exclusive partners that you have for this first year. You sold out of ads before your launch. About $150 million worth. Yes?
Meg [00:27:54] Yes.
Kinsey [00:27:55] How did that happen? Walk me through that process.
Meg [00:27:59] Yeah, well, we started in January of last year and we said, you know, we're probably going to do is basically try to get 10 sponsors who want to help us with this launch, who will be our year one advertisers on a category-exclusive basis. And they will help us create the platform, you know, because a number of them came to us and said, you have such an opportunity. Knowing what we know about other advertising platforms, digital advertising platforms, we can tell you things that we'd love to be different now and giving all the things we've learned, we can help you create a really great platform, as I said earlier, for advertisers, for customers, and for Quibi.
Kinsey [00:28:40] Are your revenue streams exclusively just people paying for the service and ad partners?
Meg [00:28:44] Yes.
Kinsey [00:28:45] Do you ever plan on adding any other further beyond that?
Meg [00:28:49] You know, at the moment, we like the idea of a subscription plus advertising revenue business model. I mean, over time, maybe there are other things that we would do. But certainly for the foreseeable future, advertising plus subscription revenue seems to be the right formula for us.
Kinsey [00:29:06] Do you see that $150 million figure growing for the next year?
Meg [00:29:09] Yes, it should. If we continue to add users, what we said to our advertisers in year one is, if we do more impressions than we thought we would do, we'll give that to you. We're not gonna ask you to pay more for more impressions. It was a fixed fee for each of these advertisers. And then we'll see where we are.
Meg [00:29:31] And then next year, those advertisers have a right of first refusal for the next category for the next year. And then obviously we'll see where we are from an impressions perspective. And I suspect we'll have probably a slightly different pricing in year two. But if we are on pace for what we hope will be the case, then we will have more advertising dollars for sure.
Kinsey [00:29:52] Okay. So we've talked about advertising on Quibi. Let's talk advertising for Quibi. Your marketing blitz in the last couple of months has also been written about probably as much as the $1.75 billion that you raised. Explain more of the process of this marketing push in the last several months. It's been pretty intense, and I've seen it a lot of places, not the least of which being the Super Bowl. I imagine you spent a pretty penny for that.
Meg [00:30:19] Yeah. So we had to, as you can imagine, had to create awareness, right? No one had heard of Quibi. No one really understood the use case. And so we had to make sure that people knew about Quibi. And so perhaps we could create interest for them to try the service. And we never actually really thought we would advertise on the Super Bowl. But about three days before the Super Bowl, we—or maybe five days before the Super Bowl—there was a distress seller who was looking to sell a 30-second ad on the Super Bowl. And it was the second spot in the first ad [indistinct] after kickoff, which is one of the great—I've tried—I've been trying to get that spot for many years as a marketer
Kinsey [00:30:56] Prime real estate.[laughs]
Meg [00:30:57] And we had great creative because we knew we were going to be on the Oscars a week later.
Kinsey [00:31:03] I find it really interesting that a lot of the Quibi creative, when it comes to these marketing campaigns, is that, like you said, not a lot of people know what it is. It's explaining what is a Quibi. How many people do you think, outside of the sort of media tech bubbles that the two of us both surely operate in, know what Quibi is?
Meg [00:31:20] Yeah. Well, I think it's probably somewhere around 20 to 30% right now of our target audience, which is 18- to 44-year-old millennials with a smartphone. And so I think it's sort of in the 20 to 30% range, you know, you don't exactly know. But growing fast. So we'll see, and it needs to continue to grow over the first year.
Meg [00:31:41] I will say we have a view here that we will launch strongly, I believe. But we're building the business for the long haul. We like to say this is a marathon, not a sprint. And if you know Hollywood, Hollywood is very focused on movie launches. You know, how is your first weekend? That's not how we think about this. We're gonna measure our successes. How was your first year? And so we want to build awareness and excitement over the the first twelve months and then, obviously, beyond that. But we've got a longer time horizon than launch weekend or launch week.
Kinsey [00:32:15] Do you think that's the tech influence?
Meg [00:32:16] I certainly think it is. You know, what Jeffrey and I know is we are—yes, we have a very important content story, but we are launching a consumer product. We're launching a consumer service. And so it's different than a movie. It's a long-term consumer service that lives on. And my experience, and Jeffrey's experience, too, is how you launch a consumer service is different than necessarily launching a movie.
Kinsey [00:32:42] OK. So, Meg, we talked kind of about here the why. Why you feel you're filling white space; the how of some of these business underpinnings. I want to go to the what, and talk more about the talent and the tech specifically in just a second. But quickly, let's take a short break to hear from our partner. — And now back to the conversation with Quibi CEO Meg Whitman. Meg, let's talk more specifically here about the product. I obviously have not tried it. [laughs] It's not launched yet. We are releasing it on the launch day. But the actual content that you're putting out—and we've talked about this—is broad, to say the least. You ever feel like you're trying to do too much, launching something that is doing both celebrity news and, say, a full-length movie in small snippets?
Meg [00:33:23] So our content is designed, as I said, for—we hope people will come for the movies. They'll be delighted by the alternative and unscripted and [indistinct]. And then they will create a daily consumption habit by finding one or two or three of the Daily Essentials that make a difference to their lives. So, it was constructed quite strategically, and we knew it was a big production job. But we stepped up for that. And remember, we don't make any content ourselves. We commission the content from our studio partners, some of whom are investors, some of whom just make content for us. And part of the way we can make 50 shows to launch and 175 shows in year one is we're not making them. And a lot of our investors have—no one studio could make this amount of content in this new format. And so the fact that we have so many studio partners makes it actually possible to deliver this amount of content.
Kinsey [00:34:19] That was exactly my next question here—we talk about $1.75 billion being a lot of money to raise before a launch, but Netflix spent something like $15 billion on content in 2019. So do you think that you're able to stay leaner from a business and content perspective because you are contracting these studios to make the content?
Meg [00:34:38] Well, I think potentially so. We're a very different service. And so we felt like we had to decide what was going to be right for us in year one for a new service like Quibi, which, as I said before, we think doesn't compete with Netflix, doesn't compete with Hulu, doesn't really compete with Disney Plus at all.
Kinsey [00:34:57] You're creating all this content with super-high octane talent. Do you ever wonder if maybe you're missing out on this binge trend if you are putting out such great content? Do you ever wish that maybe people could binge it in one sitting like we've gotten so used to doing in recent times?
Meg [00:35:13] Well, let me tell you how we're launching and then we're going to listen to users. So let's say we launch a movie. So Antoine Fuqua has done a fantastic movie for us called #Freerayshawn with Laurence Fishburne and Stephan James from Beale Street. And that movie is 150 minutes. It's about 15 10-minute chapters, roughly. And the way we watch is that will be released on day one with three chapters. The day we launch that would be three chapters of a movie. And we launch with four movies. And then, every day after that, we drop a chapter. So on Tuesday, the fourth chapter, on Wednesday, the fifth chapter, all the way through the 15 chapters that make up that movie. And we decided that we didn't want to wait a week to release another chapter—that seemed too long.
Meg [00:36:01] But we also want to see if we could create a little bit of a watercooler effect that used to exist in television and movies. With streaming, of course, number one thing people say in streaming is don't tell me, because you might be on episode 15 and I might be on episode two. And so we thought that this would be the right release cadence. If our users tell us, after the first four or five months, six months, that they really want to be able to binge and we should release these all at once, I'm sure we'll do that, but we thought we’d try this release cadence because it was a little different and create a little watercooler effect that has been lost.
Kinsey [00:36:34] Right. And I'm sure the advertisers love the idea of creating that habit where you come back every single day and see this ad for X, Y, Z company.
Meg [00:36:41] Of course.
Kinsey [00:36:42] So that answers a lot about the content questions here. But tech, like you we're talking about right at the beginning, that tech is the other big half of the business. I know that there's been a huge focus on this Turnstyle technology, basically that you can play video both in landscape and, I guess, horizontal and vertical.
Meg [00:36:59] Yeah.
Kinsey [00:37:00] What's the other word? The landscape or portrait? [laugher] [indistinct] The word escapes me, but you can play it both ways. It's a seamless transition that actually looks pretty cool under the JIFs that I've seen of it so far. How much did it cost to create that technology, if you could put a price on it?
Meg [00:37:15] Yeah. You know, interestingly, in today's world, the technology spend is not by any means the largest spend. You know, we've, I think, built a fantastic platform. 100% in the cloud for a fraction of what this would have cost us to do 10 years ago. You know, 10 years ago, you had to have your own servers. You had to build your own data center. It was a much more expensive proposition than it is today. And Turnstyle was just, really, the innovation of our engineers, who said—we said—listen, is there a way to do this? Portrait or landscape in such a way that, you know, obviously it requires that the film be shot differently. It requires a film that's rendered, and then how we stitch it together in the right form for mobile, and so it was it was just software. And so it's interesting. I mean, I'm not going to actually talk about the exact numbers, but it's quite economical to develop an app like ours these days.
Kinsey [00:38:14] Right. I assume given your background in tech, it's created with the consumer in mind. Meg, I'm curious if you think anybody's actually going to use this Turnstyle tech regularly. And every time I watch video mobile, I always have it in landscape. But anytime I'm using my phone that I'm not watching video, it's the opposite. Do you think people are going to—is that a consumer behavior that we can learn quickly enough?
Meg [00:38:38] Well, it's interesting—depending on who you are. Actually 82% of the people watch video on their phone in portrait. So you're a little different.
Kinsey [00:38:46] What?? Even on something like a Netflix?
Meg [00:38:49] Yes, Netflix, you can only watch in horizontal. Snap—Snap you can only watch it vertical.
Kinsey [00:38:55] Right.
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