23 April 2022 |

CNN+ vs. Quibi

By Trung Phan

CNN+ vs. Quibi

CNN+ is the streaming service for CNN.

It launched on March 29. On Thursday, the company announced that it will shut down on April 30. That is only 32 days. Ludicrous. 

Here is some context per Axios:

  • A big bet gone bad: CNN floated the idea of a streaming service in 2020. Like every other cable network, the move was necessary to counter widespread cord-cutting. The network allocated $1B over four years to make it happen (and ultimately spent ~$300m).
     
  • Crazy internal politics: In May 2021, WarnerMedia (which owns CNN, HBO, TBS, Cartoon Network etc.) was spun out of AT&T and merged with Discovery in a $43B deal to form Warner Bros. Discovery, which is now lead by former Discovery CEO David Zaslav.

    At the time, Zaslav’s friend Jeff Zucker ran CNN. Zucker resigned from the network in February 2022 for not disclosing a consensual office romance. With Zucker out, CNN+’s biggest champion was Jason Kilar, who headed WarnerMedia but would resign once the Warner Bros. Discovery deal closed (sorry, it’s getting knotty).
     

  • The iffy launch: The Warner Bros. Discovery merger didn’t close until April 9. This is 11 days after CNN+’s launch. Zaslav wanted the launch to be put on hold but — for antitrust reasons — didn’t communicate directly with the CNN management. Many believe that the CNN+ team rushed the project out the door to notch a win before the entire corporate structure changed. 

Once the merger closed, CNN+ was on the clock. The market’s flaccid response was exactly what Zaslav needed to kill the project (yes, I just wrote the words “flaccid response”).

Incoming CNN Chief Chris Licht told staff that CNN+’s shutdown is an “unusually shitty situation”. In one semi-positive notes for CNN+ employees, they will continue to receive 90 days of pay and an option for 6 months severance if they can’t find a job within the larger organization.

As alluded to in the intro, the CNN+ implosion feels eerily similar to Quibi (the short video app that raised $1.75B to revolutionize the mobile viewing experience, only to shut down after 7+ months).  

So, which of these media failures was worse? Let’s break it down into very unscientific categories:

  • Which pitch was worse?
  • Which content library was worse? 
  • Which app did I like least?
  • Which had the worse numbers? 
  • Which is less salvageable? 
  • Which has less of an excuse? 
  • Which one hired McKinsey?
  • Which one launched an NFT? 

Which pitch was worse?

Quibi’s tagline was “Quick Bites. Big Stories”. It promised highly produced 10-minute episodes for a younger demographic in a mobile-first experience. The founding team was ace, pairing a Hollywood titan (Jeffrey Katzenberg, former Disney Chairman and Dreamworks co-founder ) with an uber-succesful tech vet (Meg Whitman, former CEO of eBay and HP).

The app even had a ‘killer’ feature: turnstyle technology that gave a different perspective based on if the phone was turned horizontal or vertical. 

Add it all up and that’s a pretty reasonable pitch. The name Quibi — a clunky portmanteau of “Quick” and “Bites” that no one knew how to pronounce — was def the weak link. 

What was the pitch for CNN+? More CNN (which it isn’t clear anyone wants) but without the actual 24/7 live news CNN (which some people might want to catch breaking news). The service also launched without Jeff Zucker, one of the project’s major backers who ran CNN Worldwide from 2013 until he was forced to resign in 2022.

As @RampCapitalLLC puts it: “Imagine blowing $300m on a paid version of CNN when no one even watches the free version”. 

Verdict: CNN+ had the worse pitch. 

Which content library was worse? 

Quibi went hard AF on production, spending $100k per minute of screen time. That bag secured some huge names including Ariana Grande, Zac Efron, Jennifer Lopez, Liam Hemsworth, Chance the Rapper, Kevin Hart, Reese Witherspoon, Ryan Reynolds and many more.

Popular TV shows like Punk’d and Reno 911 were adapted for the app. And if we’re being honest with ourselves, the premise for Murder House Flip is so insane it seems smart (“A renovation show that takes on homes where mysterious murders happened”). 

How about CNN+’s offering? The Wall Street Journal highlights the major problem:

The demise of CNN+ shows the unique challenges of building a streaming-news business which can’t feature a live feed of the TV network or its highest profile content without running afoul of contractual obligations with pay-TV providers. 
Instead of offering access to CNN shows such as “The Lead with Jake Tapper” and “Anderson Cooper 360,” CNN+ featured less newsy fare such as “Jake Tapper’s Book Club” and “Parental Guidance with Anderson Cooper.”

Ugh. Meanwhile splashy hires like Chris Wallace, Audie Cornish and Scott Galloway clearly didn’t move the needle. 

Verdict: CNN+ had the worse content library. 

Which app did I like least?

Trick question. I never watched a single second of either service. I have no answer. 

Verdict: Push

Which had the worse numbers? 

The subscriber numbers are a bit hard to compare. Quibi saw 4.5m downloads in its first 3 months of existence, but only 72k users converted to paid after a 90-day free trial. CNN+ targeted 2.5m subscribers in year one but notched 100-150k in the first month (with only 10k daily active users; for reference, many many more people see my dumb memes on Twitter everyday).

The subscriber numbers feel like a similar level of disaster. 

To simplify this category, let’s look at how much money was spent for each day the apps existed. Based on this calculation, CNN+ burnt far more cash ($9.4m per day) than Quibi ($5.6m). 

Verdict: CNN+ has the worse numbers.

Which is less salvageable? 

Of the the $1.75B it raised, Quibi returned $350m back to investors. It was also able to sell 75 shows to Roku for under $100m. However, the startup lost a lawsuit and no longer owns the turnstyle tech IP (the counter-party said Quibi stole the technology). Quibi’s total loss is definitely more than $1B. 

By pulling the plug so early on CNN+, Zaslav and team limited the damage to around ~$300m. Warner Bros. Discovery wants to put most of its content into one app: HBO Max. CNN+ can drive value by reducing churn as part of this content bundle. Julie Andrews at Parrot Analytics has a great thread on the topic (h/t @Compound248): 

CNN+ was seemingly designed as an internal add-on to HBO Max. CNN+ was always questionable, but the content isn’t. A tile strategy makes sense as a free add-on or within some kind of linked bundle. Doesn’t make sense as a paywall within an already paid-for app.

CNN+ core offering — political news/opinion shows, docs/docuseries, some form of a live feed (eventually), international content — are all growing in demand. But they’re additive to an OTT product that carries strong, in-demand content. Supplementary, not acquisition driving.

No one questions news’ inherent value (obvs), but the perceived value of accessing that news for a fee in an era of Twitter, push notifications, and really great free sites means redefining the perceived value of what drives people to pay for news. See: NYT’s current strategy.

Arguably even more difficult for cable networks trying to migrate a brand for future longevity into an OTT space. CNN+ docs/specials will live on HBO Max. I imagine they will find a decent audience there for its size.

Some form of CNN+ can still work but just not as a standalone app.

Verdict: Quibi is less salvageable. 

Which has less of an excuse? 

Quibi launched in April 2020. The app was built for small moments outside the house (waiting at bus stop, sitting on the dump at work etc.) that vanished as the world went into lockdown. On the surface, this seems like a valid excuse until you remember that short form video app TikTok blew up in the same time period. 

The content just didn’t slap. 

Further, Quibi shot itself in the foot by not launching a TV-enabled app until 6 months after launch. By then, it was already too late. 

Conversely, the CNN+ news comes the same week that Netflix got clapped: the streaming giant reported its first subscriber loss in a decade (200k subs) and warned of more losses to come in the next quarter (2m subs). $NFLX management blamed higher prices, password sharing and intensifying competition for the hiccup. Whatever the reason, $NFLX is down ~40% and the entire streaming sector is in shock. Have we finally achieved streaming saturation?

CNN+ can also make the case that the Warner Bros. Discovery leadership was going to end the project no matter what. First, they want to consolidate content into one or two apps. Second, Wall Street is not very excited about the company’s debt (and chopping CNN+ can help alleviate financial concerns). 

There’s a theory that former head of WarnerMedia (Jason Kilar) pushed the CNN+ launch through as a way to stick it to Zaslav. When someone on Twitter floated that idea, Kilar defended CNN+’s prospects: 

The New York Times ended last year with 8,005,000 paid digital subscriptions, and continues to grow at healthy double digit percentages. It is rightly their present + future. CNN has arguably a much bigger opportunity given its global footprint/brand + video/text/audio approach.

I’m gonna take Kilar at his word here. 

(Random side note: I knew a guy when I was living in Saigon who got revenge on a bad landlord by putting shrimp shells under the floorboards; after a while, there’s an awful stench and the new tenant can’t figure out where it’s coming from…don’t do this) 

Verdict: Quibi has less of an excuse.

Which one hired McKinsey? 

It’s often said that the reason you hire a management consulting firm is so that if the sh** hits the fan, you can blame the consultants. Apparently, McKinsey advised CNN+ on the project and set the ambitious goal of 2.5m subscribers in the first year. 

Anyways, here is the best tweet about the entire CNN+ fiasco: 

McKinsey is indeed receiving a lot of blame for CNN+. Probably just the way CNN+ planned it. I just googled “McKinsey Quibi” and found no incriminating articles. I can only conclude from this that Quibi was not smart enough to hire McKinsey for corporate cover.

Verdict: Quibi loses this one. 

Which one was foolish enough to make an NFT?

Quibi came out well before NFT mania, so it dodged the bullet.

CNN+ did not dodge the bullet. It created 250 NFTs for its app launch. 87 are still available. Go get em. 

Verdict: CNN+ made NFTs (literally look below)

Final verdict

Based on my unscientific research, CNN+ (4x) is a bigger flop than Quibi (3x).

Let me clarify something: I’m not trying to “dunk” on either of these ventures. It sucks big time for people that lost jobs. But the old corporate media world needs a massive reality check. 

Between Quibi and CNN+, nearly $2B was eviscerated on content no one wants to watch. What a complete waste of resources that could have been allocated to really funny Vietnamese Canadian guy literally anything else. 

Ben Thompson’s Aggregation Theory talks about how the internet created an infinite supply of digital content. In this world, “users reap value through discovery and curation.”

For video content, TikTok and YouTube are the best discovery engines. These services create tools that empower millions of people to be infinitely creative and give content to the platforms (largely for free). People are spending almost as much time on Tik Tok every month (26hrs) vs. all of Facebook’s properties combined (32hrs). YouTube is already on the same annual revenue run rate (~$30B) as Netflix. 

Yes, these platforms have massive issues (moderation, privacy, data, creator monetization) but competing against them requires understanding how they work. 

CNN+ and Quibi both took top-down approaches with the belief they could curate themselves into pole position. There’s too much content out there and — unless you’re super premium — it’s going to get drowned out in the marketplace of attention.

This is a long way of saying that if any of my readers have $9.4m they want to burn a day on content, please reply to this email.

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Links and Memes 

How to get your first job: Jason Kilar got his first post-college job by drawing a comic strip and mailing it to Disney. They offered him an internship. Before locking in the gig, he previously sent “70 letters which went unanswered”. 

Kilar has another good job story: While attending Harvard Business School in 1997, his classmates dissected an Amazon case study. As it happened, Jeff Bezos was sitting in on the class. Kilar and his classmates said Amazon would probably fail. Later, he got to talking with Bezos and — within a week — had a job at Amazon (where he worked for 9 years). 

Incredible endings: A 5-minute breakdown of how the final shot in Christopher Nolan movies are brilliantly crafted. Many don’t give you “full closure” and this is probably why you can’t stop talking about the movies afterward. 

Steven Van Zandt: He’s the legendary member of Bruce Springsteen’s E Street Band and the actor who played Silvio in The Sopranos. Van Zandt was recently on Brian Koppleman’s podcast. It’s a great listen on the creative process. Few things that stood out: 1) What’s the difference between pop and rock? Pop is about the individual whereas rock is about the band; and 2) Van Zandt says it easier to create “original” work than break through in an established genre (eg. he had to work hard to make a successful Christmas song, which obviously is a saturated catalog).

And here are some other memes (see y’all next week):