The Bil­lion­aire’s Startup

The world is awash in stream­ing ser­vices, and Meg Whit­man was al­ready rich—but then Jef­frey Katzen­berg came call­ing.

Forbes - - IN­SIDE - By Dawn Ch­mielewski

The world is awash in stream­ing ser­vices, and MEG WHIT­MAN al­ready had her for­tune—but then Jef­frey Katzen­berg came call­ing with a mo­bile-fo­cused startup. With nearly $1.8 bil­lion

raised and Amer­ica on lock­down, con­sumers may have no choice but to try Quibi.

MMin­utes af­ter Meg Whit­man an­nounced she was step­ping down as CEO of Hewlett Packard En­ter­prise in Novem­ber 2017, her phone rang. It was Jef­frey Katzen­berg, whom she has known since they both worked for Dis­ney in the late 1980s and early ’90s— Whit­man was in strate­gic plan­ning; Katzen­berg ran the film stu­dio.

“‘What are you doing?’ ” Whit­man re­mem­bers her friend ask­ing. “I don’t know,” she replied. “I’m the chair­man of Teach for Amer­ica. I’ll prob­a­bly do stuff with my hus­band and travel.” She con­tin­ues: “He goes, ‘No. What are you doing tonight?’ And I said, ‘Know­ing you, Jef

FI­NAL THOUGHT “I AM A GI­ANT PRO­PO­NENT OF GI­ANT SCREENS. BUT I AC­CEPT THE FACT THAT MOST OF MY MOVIES ARE GO­ING TO BE SEEN ON PHONES.” —Ge­orge Lu­cas

frey, I’m hav­ing din­ner with you.’ ”

Katzen­berg flew to Sil­i­con Val­ley and, over din­ner at Nobu in Palo Alto, pitched his idea for bring­ing high-cal­iber en­ter­tain­ment to mo­bile phones. For Whit­man, the idea checked all her boxes: The po­ten­tial mar­ket for the ser­vice was huge, pre­vail­ing trends were right and it oc­cu­pied a unique niche.

“I ul­ti­mately said, ‘You know what? I think I have an­other startup in me,’” says Whit­man, 63, who first got rich (she’s worth $3.3 bil­lion) work­ing with an­other vi­sion­ary founder, Pierre Omid­yar. She helped build eBay from 30 em­ploy­ees and $4 mil­lion in rev­enue when she joined in 1998 to more than 15,000 em­ploy­ees and $8 bil­lion in rev­enue when she left a decade later.

“We’re pi­o­neer­ing into a space that only ex­ists be­cause of two things: YouTube, and Steve Jobs and the iPhone,” Katzen­berg says. “Those two things have now cre­ated a new piece of real es­tate, and that real es­tate is 7 in the morn­ing un­til 7 at night . . . . That’s the thing that’s ex­cit­ing to me.”

Two years af­ter that din­ner, Quibi (an awk­ward port­man­teau of quick and bites) is poised to launch its mo­bile stream­ing ser­vice of­fer­ing orig­i­nal movies, re­al­ity TV, come­dies and news edited into bite-sized nuggets of 10 min­utes or less, op­ti­mized for view­ing on phones.

Many in Hol­ly­wood think it’s a ter­ri­ble idea. At a time when view­ers are awash in en­ter­tain­ment options, many of them free, who is go­ing to pay for an­other? “If I’m go­ing to watch

Game of Thrones in eight-minute chunks, what’s the dif­fer­ence be­tween what he’s doing and me hit­ting the pause button?” scoffs one pow­er­ful Hol­ly­wood insider, who re­quested anonymity be­cause his clients sell shows to Quibi. Barry Diller, per­haps the great­est Hol­ly­wood vi­sion­ary of his gen­er­a­tion, re­cently called Quibi a “gutsy spec­u­la­tion” for his for­mer pro­tégé (Katzen­berg, 69, worked for Diller at Para­mount in the ’70s). “He’s so naked out there with this.”

It’s not a new idea. Back in 1999, Katzen­berg tried some­thing sim­i­lar with Pop.com, which was sup­posed to de­liver short an­i­mated and live-ac­tion films across the in­ter­net. With the tech­nol­ogy for vi­able video stream­ing still in its in­fancy, it was an un­cer­tain no­tion at best. De­spite be­ing backed by Steven Spiel­berg, David Gef­fen, Brian Grazer, Ron Howard and Paul Allen, Pop.com was dead within a year.

This time around, Katzen­berg raised enough money to play it out, in­clud­ing $1 bil­lion in Au­gust 2018 from the likes of Alibaba, Dis­ney and Sony. It for­tu­itously wrapped up a $750 mil­lion fol­low-on round in March, just days be­fore the coro­n­avirus froze the coun­try. “I’ve never seen an en­vi­ron­ment change this fast,” Whit­man says. “Ev­ery day is a new day, with new data and new con­cerns.” Luck­ily, Kevin Hart and Jen­nifer Lopez al­ready fin­ished work on their shows, and Spiel­berg has a movie in the works, at­tracted by a “cash plus” deal that lets them re­tain rights to their ma­te­rial. Af­ter two years, they can stitch to­gether their “quick bites” and re­lease them as a full-length movie.

In­ad­ver­tently, Amer­ica’s lock­down might have cre­ated the per­fect mo­ment for Quibi. Nielsen projects me­dia view­ing will spike by as much as 60% due to COVID-19. Peo­ple will cer­tainly know it’s avail­able: Quibi is spend­ing a gar­gan­tuan $400 mil­lion to pro­mote its new ser­vice and in mid-March an­nounced that it will of­fer the ser­vice free for three months.

“This is a mo­ment in time in which we have a chance to do some­thing that is putting some hap­pi­ness and some joy and some fun and some laugh­ter into peo­ple’s hands,” Katzen­berg says.

Quibi also has the ad­van­tage of be­ing loaded with fresh con­tent just as the pro­duc­tion of all new shows and movies has been stilled by the pan­demic. Quibi has been stock­pil­ing pro­gram­ming since last Septem­ber in an­tic­i­pa­tion of a pos­si­ble writer’s strike, fear­ing a re­play of 2008, when a union walk­out halted new pro­duc­tion for 100 days.

The ser­vice de­buts on April 6 with 50 orig­i­nal shows, in­clud­ing movies of­fered in cliffhange­r chap­ters such as the thriller Sur­vive, star­ring So­phie Turner (Game of Thrones) and Corey Hawkins (BlacKkKlan­s­man); 120 re­al­ity shows and doc­u­men­taries; plus news, weather and sports. In all, Quibi prom­ises to de­liver 8,500 quick bites from 175 shows in its first year.

But the $1.8 bil­lion ques­tion re­mains: Will any­one pay to watch them? Some Hol­ly­wood play­ers are adopt­ing a “DBA Jef­frey”—Don’t Bet Against Jef­frey—at­ti­tude.

“Jef­frey has only taken a cou­ple of big swings in his life, and he’s hit it out of the park,” says a se­nior ex­ec­u­tive at one of Hol­ly­wood’s ma­jor tal­ent agen­cies. “If you had blindly bet on Jef­frey Katzen­berg for the past 30 years, you’d have made a lot of money.”

Back To­gether Quibi’s CEO, Meg Whit­man, and chair­man, Jef­frey Katzen­berg, at their Los An­ge­les head­quar­ters. “I joke that if we were 20 years younger, we might have killed each other by now,” Whit­man says. “Now we only want Quibi to win.”

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