What really went wrong at Quibi

Back in April, I wrote that Quibi had already lost and was not competitive and last week this “prediction” was confirmed by the announcement that it was closing down. Quibi, which raised nearly $2 billion in investment, was doomed from the start.

While I would love to dedicate a blog post congratulating my predictive capability, the lessons from Quibi are that there are clear drivers to success in the entertainment space. Rather than focus on the Monday morning quarterbacks (including the Quibi executives) who hypothesize why it failed (if they are so all knowing, why let it happen in the first place), let’s understand what drives successful entertainment (particularly games and streaming).

Not being feature driven

The first lesson is that a cool technology is not critical to consumers of entertainment. Quibi raised almost $2 billion by convincing investors that its unique technology would separate it from other streaming services (Netflix, Hulu, Amazon Prime, etc.). It touted the ability to switch in real time between horizontal and vertical viewing as its key differentiator as well as design around short-form videos. The founders believed this technology would satisfy consumers as it would make the content easier to consume while commuting and traveling.

The ability to switch between portrait and landscape mode is the latest example of a unique technology that ultimately consumers did not care about. Foldable phones are another case of something that looks amazing but the bulk of customers see virtually no value. In the entertainment and gaming space, the industry (particularly naïve investors) is littered with other great technology that customers never valued:

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  • Blockchain and crypto-currency Blockchain technology has been touted for years as the next big thing for gaming (both social and real money). I still see many people on LinkedIn talking about the missed opportunities in gaming with Crypto, but it is hard to fathom how everyone is missing an opportunity that has been top of mind for years. The people who tout crypto for gaming have never been able to connect the potential with any real problem consumers experience.
  • 3DO There have been many examples of game consoles that had better technology or more features but could not survive. One of the most salient is 3DO, a gaming console named Product of the Year by Time magazine in 1993. Despite being “Product of the Year,” it failed versus “inferior” products from Nintendo and Sega better delivered what customers actually wanted.

Quantity is critical

The second lesson from Quibi’s failure is the importance of having an (over) abundance of content. The biggest driver of revenue in the gaming and entertainment space is quantity of content, despite many people hoping, often wishfully, to find other drivers. When managing and growing games that are already live, the most certain way to increase revenue is to release more content (and the most likely way to see a decline is not to freshen up the content).

When building and growing a successful game, it is critical to create twice as much content as you would expect your most voracious VIP to consume. I have seen repeatedly companies build a six-month content pipeline that they were confident would satisfy all players only to have their top players run through it in a matter of a couple months (or even weeks). Once they run out of content, they churn to other options and are quite difficult to re-engage. Given that these are your most valuable customers, the cost can be enormous.

Companies frequently try to get off of this “content treadmill,” by innovating on features, events or putting in blockers to slow down consumption. While new features and great in-product events can add significantly to the value, they are not a replacement for more content. You still get a huge bump from new content. Conversely, putting in artificial blockers to slow content consumption almost always frustrates players and makes them more likely to churn, so while it does limit them to your available content, it does not negate the opportunity of delivering an abundance of content (you are actually covering up the underlying issue).

This effect is not limited to gaming, having a wealth of content is critical to consumers of entertainment across all media. Netflix has continued its huge growth by offering a surplus of new, original content weekly. Same driver for Amazon Prime’s success. Other companies solve the content treadmill by relying on user-generated content, which is almost endless. User-generated content is what has driven TikTok, YouTube and even social networks like Facebook to great success. Quibi tried to compete for the same users with a fraction of what customers could find elsewhere.

You also need exceptional quality

While quantity is critical, it does not negate the need for tent pole content. Successful entertainment companies build and maintain their position by creating must-have content that is strong enough to drive consumers to switch over to their channel or product. This content needs to be exceptional and draw in customers that previously thought they were satisfied with the options they are already enjoying.

This phenomenon is consistent in entertainment, from broadcast television to over the top media to gaming. The US television network NBC established decades long dominance driven by one or two situation comedies (Cheers, Friends, Frasier). HBO took the step from niche cable network to must-have content with The Sopranos and Sex and the City. Netflix moved from profitable movie rental company to an integral element of people’s lives with shows like House of Cards and Orange is the New Black. In gaming, Epic went from technology provider to gaming dominance with Unreal.

Quibi failed to deliver tent pole content that people felt they had to see. It invested in original content with A-list stars serving as actors and producers, much of which was entertaining but nothing that was unmissable. While engaging shows from the likes of Kevin Hart, Jennifer Lopez and Steven Spielberg may have entertained viewers, they did not have any flagship content that drove or even retained customers.

Need to plan for Complex Environments

I recently wrote about General Stanley McChrystal’s leadership lessons, with one of the keys being you need to plan for complex, rather than complicated environments. Being complex is different from being complicated. Things that are complicated may have many parts, but those parts are joined, one to the next, in straightforward and simple ways. A complicated machine like an internal combustion engine might be confusing to many people but it can be broken down into a series of neat and tidy deterministic relationships. Conversely, things that are complex, such as insurgencies or the streaming entertainment industry, have a diverse range of connected parts that interact regularly. A small disturbance in one place could trigger a series of responses that build into unexpected and severe outcomes in another place.

With Quibi, that disturbance was Coronavirus. In June, Quibi Founder Jeffrey Katzenberg said he attributed “everything that has gone wrong to coronavirus.” The reality is that to be successful in the entertainment space now, you need to build a company that is resilient and can adapt as the environment changes.

The Halo Effect confirmed

A final lesson from Quibi’s failure is that the Halo Effect is alive and well in the entertainment space. Quibi largely secured its financing on the reputation of its two leaders, founder Jeffrey Katzenberg and CEO Meg Whitman. I am a big fan of both. I love the content Katzenberg created as the Chairman of Disney for ten years and co-Founder of DreamWorks. I admire Whitman, who I credit with growing eBay into the company it is today and I hoped would run for the US Presidency several years ago. Success in these efforts, however, only highlights that you need a different skill set to grow a great streaming company.

The Halo Effect is attributing success or failure to an individual or specific action, which is often misleading. Success and failure are driven by multiple factors and there are no shortcuts to achieving great results. In the situation of Quibi, the leadership skills needed to succeed where very different to what was needed at DreamWorks or eBay:

  1. Start-ups are different. Scaling a company from zero to significant market share is very different than growing a large company. At a start-up, you need to find product/market fit and then grow from there. At a company like eBay, you already have the fit and need to focus on driving out the competition, marketing and margin.
  2. Streaming is a different world for entertainment. At a company like DreamWorks, you have a complicated problem to solve. You need to deploy hundreds of millions of dollars to create one piece of ultra-compelling content. In streaming media, you need a flow of compelling content while dealing with a complex environment (see previous point).
  3. Technology has evolved When Whitman led eBay, recommendations and personalization were a unique add-on. Now machine learning is part of the cost of doing business and you need to ensure every customer is getting the right experience for that individual. Companies like Netflix run thousands of tests a week and have terabytes of data on their customers, Whitman and Katzenberg did not have experience leveraging this data to meet customer expectations.

The predictability of the entertainment industry

Rather than chalking up Quibi’s failure to bad luck or the inability to create a hit in a hit-driven industry, it is the perfect example of the fundamentals to succeeding in the entertainment (including gaming) space:

  • Do not expect to rely on great technology or unique features to succeed, your customers need great content
  • Successful entertainment companies provide a glut of content so their customers never get satiated
  • You need to expand beyond great content to truly compelling and unique content that forces customers to go out of their way for your offering
  • Successful companies must be resilient and adaptive so they can adapt to a very complex environment where there are many unpredictable and uncontrollable events
  • The leadership team has to have the right skillset for this effort, not simply a track record of success in other ventures.

Key takeaways

  1. Quibi’s failure was very predictable and these predictors provide a framework of what companies need to do to succeed in the entertainment space.
  2. Quibi relied on a unique technology, the ability to watch content seamlessly in portrait or landscape mode, rather than relying on creating content people wanted. You cannot succeed in entertainment by relying on technology.
  3. Other key lessons are that great entertainment companies need to deliver a overabundance of content, much more than you expect even your heaviest users to consume, and some flagship products that forces people to try your offering.

How to get your big initiatives done

A source of frustration not only for me but many of my colleagues is how important and large initiatives often run out of steam before getting finished. This failure is not due to re-evaluating the importance of the initiative but a loss of momentum or focus. Given that the value has not changed, these projects failing represents a huge potential loss. MOVE by Patty Azzarello provides a great framework for getting these projects done.

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Over the years, I have championed or been part of multiple projects that had great potential, either new endeavors or initiatives to increase efficiency, but after a great start they get bogged down in the long middle phase. It’s not just in business where we run into this phenomenon. In MOVE , Azzarello uses the example of someone deciding to jog daily. First few days you get out and have a great run. Then your day of rest becomes two days of rest, then a week, eventually you are no longer jogging. Dieters face the same challenge. First week you stick to the new diet religiously and lose ten pounds, then you decide to cheat one night and have a piece of cake. Within a few weeks you are back to your old habits, and weight. To combat this phenomenon, Azzarello developed the MOVE model, which stands for Middle, Organizational, Valor and Everyone.

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Middle

The first element of the MOVE model is focusing on the Middle phase. This is the critical period as it is easy to get momentum at the beginning and also when the finish line is in sight it provides sufficient incentive to complete the initiative. It is the long, often hard and boring, phase in the middle where projects regularly stall and die.

To move through this middle phase, you need to allocate resources and measure outcomes. She points out you need to move from a vague timetable to one with small, clear and achievable targets throughout the process. In the dieting example, rather than just looking to lose 50 pounds, you set targets of losing 5, 10, 10, 10, 5, 5 and a final 5 pounds. Using the MOVE model with clear targets throughout the path will greatly improve the likelihood of getting the initiative done.

Organization

The second key of the MOVE model is Organization, building and aligning the organizational structure to succeed. You need to determine you have all the right people and resources. At the inception of the initiative, create a list of the resources and roles needed to succeed (do not tie it to your current team). Do not leave any role undefined and put in details on what every role entails (ability and experience). Also speak with colleagues and flesh out the requirements based on their input.

Once you understand what you need to succeed, then see what current team members can fill these roles. If there are gaps or unnatural fits, create a plan to overcome those issues. If you cannot get the resources to fill the gaps, build a plan on how you will overcome these holes. They will not go away simply by ignoring them.

The final phase of the O element is motivating the organization. You need to engage the team and ensure there is a common, and meaningful, purpose. Form bonds with everyone on the team and help them see the bigger picture of what you are trying to achieve.

Valor

The third part of the MOVE model is Valor. Every project runs into obstacles. There will be hard days as well as easy ones. To keep these hard days from sidetracking or stopping the project, you need to create a sense of valor. Being valorous is a matter of drawing on inner and outer resources. You need to ensure that your team members, as well as yourself, will not be paralyzed by fear when these challenges occur but will push forward despite these uncomfortable feelings. Rather than doing it all internally, connect with friends and mentors who can advise you on your initiative, preferably through past experience.

Your initiative may involve new processes and to help you fight through challenges when implementing them you should build in checkpoints and guidelines. By breaking up the initiative, it will be easier to fight through challenges as there will be a clear completion node.

Valor is much easier if you have a policy of ruthless prioritization. Rather than focusing or getting bogged down on tiny, unimportant details you work on the tough decisions that will make a major difference. Then, rather than having to fight through tens or hundreds of challenges, you are only fighting the ones that matter. To help ruthlessly prioritize, make a list of the three things crucial to the initiative’s success, consider these necessary and non-negotiable.

Everyone

The final part of the MOVE model is Everyone, getting everyone involved. No matter how great your valor is, you will not succeed in getting through the middle phase without the involvement of everyone. Rather than telling your team what the initiative is and how to get there, talk with them about how it will work. Not only will you get valuable feedback but they will start talking to each other about it, which will provide them with more ownership.

To help get everyone involved, create spaces where strategic conversations tied to the initiative can take place. Let them discuss the initiative and priorities. Also, get them involved in documenting the successes along the way. As they hit the milestones, have them talk about it and acknowledge the success. It is also important acknowledge the problems and how you will get through them to keep the project on tracks.

For everyone truly to be involved, there needs to be trust among your team. The best way to build trust is to talk to members of your team, more precisely to listen to them. Ask them what they think of the initiative and how it is going. Act on concerns that they show. Asking these questions will help forge deep bonds with your team.

MOVEing forward

The MOVE model is more than a just four elements of a process; it is a way to get big initiatives and changes done. The key to using it to make it through the challenging middle phase of an initiative is how the MOVE model starts with a clear and concrete strategy, builds an organization structure with capacity, highlights valor to make tough decisions and prioritize change and then engages everyone.

Key takeaways

  1. Many important initiatives, from new products to operational efficiency, bog down and die in the middle phase. They initially have momentum but stall once the initial burst dies down.
  2. To MOVE projects through this middle phase, the Middle element needs a clear and concrete strategy and you need an Organizational structure with capacity to complete the initiative.
  3. The final keys to getting through the middle phase are Valor, making tough decisions and prioritizing the initiative, and getting Everyone involved.