Issue #3 | Quibi & Arrive
By Jeffrey Dong
Welcome to E-MERGE!
Week 5 is in the books. The days seem to be all converging together and time is definitely a social construct. Thank the lord streaming has been a boon to us couch potatoes. However, if you’re trying to restrain yourself from your awful streaming habits, scroll down to read my deep dive into Quibi, a newcomer into the world of streaming, and Arrive, one of Jay-Z’s latest ventures. Have a great Sunday!
After getting used to the weeks-long routine of staying at home, I can’t help but think what it was like to commute everyday into and out of work.
In the not-so-bustling suburbs, there’s not a whole lot to miss except for morning rush hour, which, for a lack of a better term, sucks. During my days of working overseas in Hong Kong, I’d often take the MTR, which was everyone’s favorite public transportation. I usually dreaded these trips during the summertime since everyone gets a little too close for comfort and you can feel the perspiration in the air. Oh, the joy of the dog days commute…
It was during these times that I’d often daze off into the abyss of the subway crowd. Although everyone had their own little idiosyncrasy ingrained into their commute, I always chuckled at the one astute observation I made during my daily 6-minute ride: everyone’s sucked into their phones. The majority were playing video games, while reading the Apple Daily news and streaming videos came in at a close 2nd and 3rd, respectively. Nonetheless, I was surprised to see that people were willing to go to the extremes to absorb any form of content on their devices.
Heck, I saw a teenager come into a jam-packed metro with a full-blown iPad, watching highlights of the 2017 NBA Finals between the Warriors and Cavaliers. It was 2019. These moments go to show that the technology we grip so dearly within the palm of our hands encapsulates a goldmine of opportunities. You could be waiting at the never-ending check-out line at Costco, or killing insignificant time at the department store while your significant other shops the day away. Every minute unused or spent in idle is fair game for the taking. Quibi’s here to help you rethink those minutes.
So How Do You Say it?
Founded by industry veteran Jeffrey Katzenberg, Quibi (pronounced “kwih-bee”) is a short-form, subscription-based streaming service that offers Hollywood-quality, star-studded video content straight to your cell phone. All your favorite genres like comedy, thriller, and horror are available in a plethora of formats ranging from feature films to docuseries to reality TV. Whether you want to spice up your addiction for home makeover shows with murder or see what it’s like to have Chrissy Teigen as the next Judge Judy, the service introduces a wide array of programming that can keep you busy minutes at a time. With the launch of a product that’s been two years in the making, Quibi is set to create an entirely new entertainment experience for you.
Hold up: If you’re like most quarantined folks these days, you’re probably chalking up a lot of intimate time with your subscription-based accounts with Netflix, HBO, Disney+, Apple TV, Hulu, and, most recently, Peacock. So, why Quibi?
For Hollywood, enough isn’t a word that can be found in their vernacular.
Quibi wants something most current streaming platforms don’t have the bandwidth to capture: your in-between moments. I’m talking about the minutes you spend in the waiting room at the doctor’s, on the commute to work, or in the bathroom between 2-3PM during the workday. Quibi wants to serve as your primary alternative to your Instagram- or TikTok-scrolling habits, not your incorrigible Netflix-binging routine.
But what will it take for you to stop mindlessly watching people do the Tootsie Slide on TikTok and watch an episode of Punk’d on Quibi, let alone spend to watch it too?
The content on Quibi is sold to be as captivating as the format it’s founded upon. For example, a 2-hour feature film is told in 10-minute chapters or episodes, which get released on a daily basis. Similar to the “water cooler effect” introduced by serialized television, Quibi uses its daily chapter releases to engage and leave the audience in suspense, thus coming back for more the next day. For those that enjoy binge-watching, it goes without saying that it’s easier to binge-watch 10 short episodes of a cooking show on Quibi than watch the entire series of The Sopranos in one sitting.
Another innovative undertaking that makes Quibi turn heads is in its patented technology. The Turnstyle tech enables you to see full screen video in either landscape or portrait mode without interrupting the video. Although watching in landscape mode makes the mobile viewing experience more cinematic, its signature innovation can be earth-shattering for the night owls who try to stream videos in bed but can’t seem to get the orientation right.
A Hollywood-Silicon Valley Love Story
The brilliant minds behind this new venture are not foreign to the challenges associated with creating disruptive products within their respective industries. In Hollywood, Jeffrey Katzenberg is well recognized for co-founding the studio that brought you the thrilling trilogies of Madagascar and How to Train Your Dragon. Through his work at DreamWorks, he became a transcendent figure in leading the wave of computer animation in film and bringing it mainstream to the kids and parents at home. For this act, he has teamed up with Meg Whitman, former head honcho of eBay and Hewlett Packard Enterprise, in hopes of tapping into premium mobile streaming as the next revolutionary product in media.
Although its management team is just as star-studded as the actors that make up its shows, Quibi’s roadmap to launch was anything but seamless. The company didn’t have a minimum viable product or a beta version to showcase to private investors. The dynamic duo was purely pitching an untested concept, a concept that requires a huge buy-in from the consumer. The crowded market Quibi’s trying to penetrate isn’t streaming itself; it’s your time and entertainment dollars.
Since there’s a plethora of options already keeping you distracted on your phone and time is finite, Quibi’s strategy is premised on the idea that a lot of content be made readily available during launch. Producing tons of content is an extremely capital-intensive venture, especially for a brand that’s coming out of thin air. In order to match industry expectations on production value, Quibi raised a whopping $1.75 billion, which is a lot of capital for your typical startup but falls in line with Hollywood norms. To put it into perspective, Quibi’s films cost $100K per minute.
What’s making this business strategy possible, thus unique to the industry, is that Quibi is making 50 shows by not making them. They’re commissioning the content from an array of studio partners (some of whom are investors) to produce their films and shows. After totalling the production costs and an additional 20% margin for studio partners, the content then gets licensed to Quibi for 7 years. Once the 7 years are up, the content creators rein control over their own IP. It’s a win for Quibi to buy in content creators and studios alike into their product and a win for content creators to experiment with what could be the next big mobile phenom.
Big Bites. Quick Stories.
With a lot riding on the app, every minute, subscriber, and advertiser counts. Quibi has already sold out its $150 million advertising inventory to 10 advertisers for the first year. If you don’t have the patience to sit through a 15-second Taco Bell ad, don’t worry. Consumers can choose between two subscription options: $4.99/month with ads and $7.99/month without ads. If you’re a frugal person like me that doesn’t mind killing a few seconds, the first option is pretty economical. However, it’s hard to justify that cost when you have other similarly-priced subscription alternatives like Apple TV ($4.99/month) and Disney+ ($6.99/month) on the table. The question then lies: what kind of experience would you rather pay for?
If cost isn’t a problem, the content in its current form can be a deal-breaker. The stories being told don’t seem to live up to its hype and are just not creative enough. There’s no breakout hits like Game of Thrones (HBO), Stranger Things (Netflix), Mandalorian (Disney+), The Morning Show (Apple TV), and The Handmaid’s Tale (Hulu) that’s worth talking about with your friends. Its spending budget on content is incomparable to those of its streaming superiors. As quoted by renowned NYU Marketing Professor Scott Galloway, who has his own hot take on the streaming wars, “Quibi is 'bringing a squirt gun to a howitzer fight”.
And for the cherry on top: the majority seem to have never heard of Quibi. I guess promoting aggressively through Instagram and in high-profiled events like the Super Bowl and the Oscars can only go so far.
If you’ve seen The Most Dangerous Game, you’d understand that there’s a fine line between life and death. For Quibi, that fine line will be determined by its ability to attract enough subscribers and generate enough impressions through its ad-supported platform. In these predicaments, quality must meet (or exceed) quantity if the platform wants to retain users. Although it hasn’t been publicly disclosed yet, Meg Whitman discussed the focus of achieving profitability within a “reasonable” timeframe.
Regardless of that timeframe, the company isn’t insusceptible to the fallout of the coronavirus. You can call it favorable or ill-timed, but the launch of the new streaming service will be one to remember. During its first week of launch, Quibi hit 1.7 million downloads, a figure higher than several pessimistic estimates. However, it’s still underwhelming if you compare its launch to Disney+, which gained over 10 million downloads its first day. If you want to set future mobile real estate expectations, just know that TikTok amassed over 800 million monthly active users worldwide to date.
People aren’t commuting as much to work today, and long-form options like Netflix become much more desirable to watch from your couch. Due to the backlash over Quibi’s mobile-only viewing experience (😬), Whitman recently stated that the company is accelerating its efforts to enable Quibi to cast to TV. The narrative for Quibi is far from being written, but only time will tell whether its growth trajectory can sustainably persist through these tumultuous times.
🔊 Public Service Announcement 🔊
“Allow me to re-introduce myself, my name is HOV…”
The man really needs no introduction into the world of music. Jay-Z is one of the world’s best-selling musicians, boasting 22 Grammys (most ever by a rap artist) and racking up a record-breaking 14 for the most No. 1 albums held by a solo artist on the Billboard 200. He was the first rapper to be inducted into the Songwriters Hall of Fame and is considered to be one of the greatest artists of all time.
Yet, his capabilities outside of rap far precede his musical accolades. With his stacked up fortune, he co-founded several businesses in sectors ranging from retail (Rocawear) to entertainment (Roc Nation), bought out businesses like music streaming service Tidal and champagne brand Armand de Brignac, and invested in everything in-between along the way from the Brooklyn Nets to his Jean Michel Basquiat art collection. His investment track record is no humble brag. Within the realm of startups, Jay-Z rode on the hype train and backed high-profiled companies like Uber in 2011 and Impossible Foods this past year. With his business acumen, powerful name, and exceptional ability at branding, Mr. Carter sets sail to shatter the glass ceiling once again and pursue his new expedition into the world of venture capital.
Back in 2019, Mr. Carter helped co-found Marcy Venture Partners, a venture capital firm dedicated towards flushing out disruptive consumer brands rooted in culture. Since then, the firm has made numerous deals, with investments ranging from electric mobility startup Wheels to Rihanna’s lingerie product line Savage X Fenty. According to its most recent filing in February, MVP raised $85 million from 54 different investors for its first fund, a milestone for the firm seeking to build game-changing consumer brands. In another attempt to diversify his investments, Jay-Z is making headways in a similar, yet uncharted direction for his label.
The Arrival of Arrive
Considered as an extension of his entertainment company Roc Nation, Jay-Z helped launch Arrive in March 2017. Arrive is a VC platform seeking to invest in early-stage startups that are in need of capital and assistance in branding and business development. At large, Roc Nation’s brand carries a certain weight that can’t be matched in the entertainment industry; its underlying business is heavily premised on marketing. Insights used to promote athletes and artists in Roc Nation can be transferable to help consumer-facing startups build the clout needed to grow. This unique and unparalleled proposition is especially critical in the hyper-relevance era we live in today.
To date, Arrive has made key investments in fledging unicorns like Robinhood, the commission-free online trading platform, and Sweetgreen, the fast food chain for salads (name a more iconic oxymoron). Its investments are geared towards this new generation of tech-enabled, lifestyle-focused businesses whose aim is to tap into the wallets of deep-pocketed millennials.
Arrive’s arrival into venture capital isn’t coincidentally timed. This firm gives the hip-hop mogul the opportunity to extend his brand and revenue stream into not just other sectors, but other territories. His latest move? Investing into Southeast Asia.
They arrived back in 2018, not too long since its inception. After spending two years exploring investment opportunities in Southeast Asia, the Jay-Z firm backed several brands that showed subsistence in their products and business models locally. These include Kopi Kenangan, a Jakarta-based startup that makes quality, yet affordable coffee easily accessible to the everyday consumer, and Super, Indonesia’s first social commerce platform that converts community leaders living in rural areas into e-commerce agents and retailers.
Like a Rolex whose value appreciates with time, Arrive looks for long-term investments that fit the profile with what Roc Nation represents. It’s taking an “invest-in-what-you-know” approach and tailoring its strategy towards the growing e-commerce and retail landscape that’s flourishing all around.
Not exactly a full-fledged VC itself, Arrive isn’t investing upfront large sums of capital into startups and raising massive funds for that matter. Instead, they team up with big-name investors like Sequoia who are leading funding rounds in the region. Historically, the presence of US firms in Southeast Asia has been fairly limited. However, the times are changing, the doors are opening, and the economy is booming. With countries like Indonesia and Singapore maturing faster than you can say puberty, emerging markets are proving to be an independent, growing brand in and of itself.
The Hype for Southeast Asia is Real
The world’s currently seeing explosions in investment opportunities in China and India due to several converging factors, some worth noting. Both countries are 1) experiencing a surge in millennial consumers who are willing to spend on non-essentials and 2) adopting a tech-enabled digital economy for their 1.3+ billion population. What makes Southeast Asia truly interesting is the region’s demographic parallels to those seen in China, India, and even the US. Indonesia is currently the fourth-largest country in the world by population (273 million); in less than a decade from today, more than half of its people, who are comparatively young, will be categorized as middle-class and affluent consumers. A growing middle-class translates to more disposable income. More money = more buying power for luxury goods. By 2030, the middle-class population and second- or third-tier cities will be the main drivers of economic growth in Southeast Asia.
Celebrity endorsements combined with large sums of investments made by VC firms already present in the region makes for a rather strategic power play for both teams. It’s no brainer that celebrities are powerful in a sense that they are brands themselves. The tech boom in the US has paved the way for celebrities to use their fame and fortune and become “Hollywood angels”. These investors consist of actors (Ashton Kutcher, Jared Leto), musicians (Jay-Z, Katy Perry, Snoop Dogg), and athletes (Serena Williams, Kevin Durant) who are looking to score on the next big thing. Their names are not only mainstays in Silicon Valley, but household around the world. In places like Southeast Asia, startup competition is fierce and names are not as easily recognized. Businesses that hope to branch out and gain global recognition could use some of the branding power celebrities have to scale beyond their local zip code.
If you were a fan of this newsletter and would like to share it to a friend, you can suggest they sign up here. Please share any comments, feedback, or tips to jreydon96@gmail.com.