5 ms·

$2B gone in 6 months must be something of a record for burn rate. A starting investment of that size probably qualifies it for a record in the fat (as distinct

by arbuge 6y ago

$2B gone in 6 months must be something of a record for burn rate. A starting investment of that size probably qualifies it for a record in the fat (as distinct from lean) startup size category as well.

holler 6y ago
Working on a bootstrapped project and just imagining what I could do with $2billion... Imagine what half the people on HN could do with it. It's obscene. I think they were trying to essentially buy their way into mainstream adoption, but it doesn't really work like that.
- president 6y ago
  > I think they were trying to essentially buy their way into mainstream adoption, but it doesn't really work like that. It could work if your product met or was at least close to the minimum quality standard of your competitors. From what I've seen and read, Quibi was horribly substandard.
- deleted 6y ago
  [deleted]
- gumby 6y ago
  > trying to essentially buy their way into mainstream adoption, but it doesn't really work like that. Katzenberg comes from an industry (film studios) for which that is largely the model. They are willing to have some expensive failures ($100MM-scale) if the successes will launch a "franchise" which is subsequently mined. A failure more than an order of magnitude off what's tolerable in his old industry may be hard to survive, who knows. But industrial filmmaking is a lot like industrial food production: a blend of fear (customers won't adopt the new) and dictating the product to the customer.
  - holler 6y ago
    > They are willing to have some expensive failures ($100MM-scale) if the successes will launch a "franchise" that makes sense, and definitely feels like they were building a rocket-sized dart to throw. it'd be interesting to see the breakdown on how much of that capital went towards engineering the app vs content/other.
    - gumby 6y ago
      Well it was $2Bn not $100MM so don’t know how ppl will feel. Probably call it “Silicon Valley style” and disregard it. The Hollywood model spends most of that money on ppl and marketing, little on tech. K has no tech experience and W only a smidgeon despite her exec jobs (eBay & HP). So I would be shocked if they spent more than $25MM on their stack which is mostly conventional. I’m sure the rest was blown on marketing, high salaries, consultants, offices, and deals with actors.
      - holler 6y ago
        thanks for the insight, that's really fascinating! > I’m sure the rest was blown on marketing, high salaries, consultants, offices, and deals with actors It sounds like the antithesis of "lean startup". Of course it could have worked out the other way if they had nailed market-fit. It does make me wonder if they could try to salvage the tech and try a slight pivot.
      - pfranz 6y ago
        > K has no tech experience I mean, I'm not sure exactly how much credit to give him, but DreamWorks Animation had a lot of tech and he oversaw it for 20+ years. He stood up a brand new animation studio while the industry was digitizing, which means everyone used in-house tools because off-the-shelf stuff wasn't available. They purchased PDI, had been doing CG since 1980. They maintained a proprietary CG pipeline for decades and integrated multiple locations. This was during a time when the industry went from NURBS to sub-d, from basic direct lighting to global illumination to path-tracing--mostly using software written in-house. Not to mention the larger issues of asset management, data center scaling (power, water, and city requirements) and the staff and budgets to support all of that. At scales only a handful of other facilities were doing CG at, while competing for innovation, scale, and quality. I'm pretty sure Katzenberg and Whitman courted when she was at HP and they were DreamWorks' "technology partner." They worked together on things like a price-friendly color-accurate LCD monitor and the Halo video conferencing stuff. I know in the years before DreamWorks was sold to Universal there were Skunk Works projects working on phone apps. I imagine all of that was practice for this. I'm sure most of the money was on content and advertising. I'm not exactly sure what you mean by not having tech experience, but he definitely oversaw a lot and worked with people who had.
  - aspaceman 6y ago
    Worth keeping in mind he left that industry because he became relatively incompetent. Business shifted to franchised superhero movies and he didn’t adapt.
- Barrin92 6y ago
  >just imagining what I could do with $2billion... Imagine what half the people on HN could do with it or alternatively twenty thousand 100k research grants in the sciences. Would be pretty great if we could produce some knowledge instead of more mediocre TV shows.
csours 6y ago
I wonder how much of that $2B went to individual contributors like actors and crew. > "Among the backers were most of the major Hollywood studios, Google, Alibaba and the Madrone Capital Partners." I wonder how much of that $2B was eaten up with "Hollywood Accounting"
- crazygringo 6y ago
  Actors and crew are always paid at least SAG union minimum, and recognizable actors negotiate higher. Trust me -- this was a bonanza for them. There's never been a greater demand for content than the past couple years, with platforms exploding. No need to worry about actors or crew being exploited. Happily, the union makes sure of that! (E.g. in contrast to the tech world.)
  - csours 6y ago
    https://www.inputmag.com/culture/exclusive-by-exploiting-a-union-loophole-quibi-is-underpaying-its-shows-crews https://www.inputmag.com/culture/exclusive-by-exploiting-a-u... They are getting minimums, but maybe only minimums. > "Original, live action dramatic new media productions which are less than 20 minutes in length and made for initial exhibition on a subscription video-on-demand consumer pay platform are not subject to” the tiered breakdowns that help set wage scales “regardless of their budgets." Another interesting point: > "While Quibi owns the licensing for its shows for seven years, those terms only apply to the short format. A feature-length edit of each show is also made, and after two years, producers/showrunners/other creative intellectual property holders have the right to sell it to distributors."
  - marcinzm 6y ago
    >E.g. in contrast to the tech world. Given how much tech pays versus how easy it's to get into tech (ie: compared to becoming a well paying lawyer or doctor) I doubt too many people mind.
  - mikewhy 6y ago
    Does that still apply when they're skirting laws? [1] [1]: https://mobile.twitter.com/LukeXCunningham/status/1318982719922032641 https://mobile.twitter.com/LukeXCunningham/status/1318982719...
clairity 6y ago
this is what it looks like when concentrated capital is misallocated. you get one big flop instead of a bunch of small experiments that give you more bites at the red delicious.
jamesjyu 6y ago
I was thinking that this would be comparable to big movie flops. But no, even if you combine the 10 worst flops in history, it's just shy of 1.2B.
jjmorrison 6y ago
It wasn't necessarily all spent. The team likely made a decision to return the capital left if the traction really wasn't there.
- bluedevil2k 6y ago
  I read in another article they had $800M left to give back to investors
rsp1984 6y ago
They launched the thing to the public 6 months ago. Started building it and acquiring content much earlier though. That's where most of the $2B went.
dahart 6y ago
> A starting investment of that size probably qualifies it for a record in the fat (as distinct from lean) startup size category as well. With that kind of funding, and given who the founders are, maybe “startup” shouldn’t be used at all? The linked article didn’t use that term, and I mean, a startup that becomes worth $1B is called a “unicorn”, and this venture was launched with more funding than that.
Osiris 6y ago
Given how much Netflix and others spending on producing content, I wouldn't be surprised if most of the money was spent on content.
Impossible 6y ago
It's funny that people are so anti-AR/VR that they called Magic Leap a scam for raising $3B, but a 10 minute video streaming app that burns through $2B in 6 months is completely legitimate? I understand that content can be expensive, but Magic Leap did produce actual consumer hardware, and Microsoft and others have spent similar amounts to make comparable hardware. I'm not saying that Magic Leap is a successful company by any stretch, but if ML is a Theranos style scam, then Quibi was as well.
- deleted 6y ago
  [deleted]
- Traster 6y ago
  The reason Magic Leap was called a scam is because they demo'd technology that seemed too good to be true and then never produced a consumer product that delivered that demo. That's why people described it as a scam- there was no good faith understanding they could deliver what they promised. Compare that to Quibi where they have a platform, they have the content that they paid for. The problem isn't they promised something they can't deliver, the problem is they delivered something no one wants. It's not difficult to see how you'd pour billions into original content and a distribution platform. Netflix does that. It's difficult to understand how a company can show you a fantastic demo, spend billions on development and then produce a product that doesn't even slightly live up to the demo.
treis 6y ago
>$2B gone in 6 months must be something of a record for burn rate 2 billion is chump change for the market they're in. Netflix is spending 15 billion a year on content, Amazon and Apple like 6 billion a piece, and Hulu is around 3. Cash burn is similar. Netflix is 10s of billions in the hole since they were founded and continues to burn a few billon a year.

by arbuge 6y ago

holler 6y ago

Working on a bootstrapped project and just imagining what I could do with $2billion... Imagine what half the people on HN could do with it. It's obscene. I think they were trying to essentially buy their way into mainstream adoption, but it doesn't really work like that.

president 6y ago
> I think they were trying to essentially buy their way into mainstream adoption, but it doesn't really work like that. It could work if your product met or was at least close to the minimum quality standard of your competitors. From what I've seen and read, Quibi was horribly substandard.
deleted 6y ago
[deleted]
gumby 6y ago
> trying to essentially buy their way into mainstream adoption, but it doesn't really work like that. Katzenberg comes from an industry (film studios) for which that is largely the model. They are willing to have some expensive failures ($100MM-scale) if the successes will launch a "franchise" which is subsequently mined. A failure more than an order of magnitude off what's tolerable in his old industry may be hard to survive, who knows. But industrial filmmaking is a lot like industrial food production: a blend of fear (customers won't adopt the new) and dictating the product to the customer.
- holler 6y ago
  > They are willing to have some expensive failures ($100MM-scale) if the successes will launch a "franchise" that makes sense, and definitely feels like they were building a rocket-sized dart to throw. it'd be interesting to see the breakdown on how much of that capital went towards engineering the app vs content/other.
  - gumby 6y ago
    Well it was $2Bn not $100MM so don’t know how ppl will feel. Probably call it “Silicon Valley style” and disregard it. The Hollywood model spends most of that money on ppl and marketing, little on tech. K has no tech experience and W only a smidgeon despite her exec jobs (eBay & HP). So I would be shocked if they spent more than $25MM on their stack which is mostly conventional. I’m sure the rest was blown on marketing, high salaries, consultants, offices, and deals with actors.
    - holler 6y ago
      thanks for the insight, that's really fascinating! > I’m sure the rest was blown on marketing, high salaries, consultants, offices, and deals with actors It sounds like the antithesis of "lean startup". Of course it could have worked out the other way if they had nailed market-fit. It does make me wonder if they could try to salvage the tech and try a slight pivot.
    - pfranz 6y ago
      > K has no tech experience I mean, I'm not sure exactly how much credit to give him, but DreamWorks Animation had a lot of tech and he oversaw it for 20+ years. He stood up a brand new animation studio while the industry was digitizing, which means everyone used in-house tools because off-the-shelf stuff wasn't available. They purchased PDI, had been doing CG since 1980. They maintained a proprietary CG pipeline for decades and integrated multiple locations. This was during a time when the industry went from NURBS to sub-d, from basic direct lighting to global illumination to path-tracing--mostly using software written in-house. Not to mention the larger issues of asset management, data center scaling (power, water, and city requirements) and the staff and budgets to support all of that. At scales only a handful of other facilities were doing CG at, while competing for innovation, scale, and quality. I'm pretty sure Katzenberg and Whitman courted when she was at HP and they were DreamWorks' "technology partner." They worked together on things like a price-friendly color-accurate LCD monitor and the Halo video conferencing stuff. I know in the years before DreamWorks was sold to Universal there were Skunk Works projects working on phone apps. I imagine all of that was practice for this. I'm sure most of the money was on content and advertising. I'm not exactly sure what you mean by not having tech experience, but he definitely oversaw a lot and worked with people who had.
- aspaceman 6y ago
  Worth keeping in mind he left that industry because he became relatively incompetent. Business shifted to franchised superhero movies and he didn’t adapt.
Barrin92 6y ago
>just imagining what I could do with $2billion... Imagine what half the people on HN could do with it or alternatively twenty thousand 100k research grants in the sciences. Would be pretty great if we could produce some knowledge instead of more mediocre TV shows.

csours 6y ago

I wonder how much of that $2B went to individual contributors like actors and crew. > "Among the backers were most of the major Hollywood studios, Google, Alibaba and the Madrone Capital Partners." I wonder how much of that $2B was eaten up with "Hollywood Accounting"

crazygringo 6y ago
Actors and crew are always paid at least SAG union minimum, and recognizable actors negotiate higher. Trust me -- this was a bonanza for them. There's never been a greater demand for content than the past couple years, with platforms exploding. No need to worry about actors or crew being exploited. Happily, the union makes sure of that! (E.g. in contrast to the tech world.)
- csours 6y ago
  https://www.inputmag.com/culture/exclusive-by-exploiting-a-union-loophole-quibi-is-underpaying-its-shows-crews https://www.inputmag.com/culture/exclusive-by-exploiting-a-u... They are getting minimums, but maybe only minimums. > "Original, live action dramatic new media productions which are less than 20 minutes in length and made for initial exhibition on a subscription video-on-demand consumer pay platform are not subject to” the tiered breakdowns that help set wage scales “regardless of their budgets." Another interesting point: > "While Quibi owns the licensing for its shows for seven years, those terms only apply to the short format. A feature-length edit of each show is also made, and after two years, producers/showrunners/other creative intellectual property holders have the right to sell it to distributors."
- marcinzm 6y ago
  >E.g. in contrast to the tech world. Given how much tech pays versus how easy it's to get into tech (ie: compared to becoming a well paying lawyer or doctor) I doubt too many people mind.
- mikewhy 6y ago
  Does that still apply when they're skirting laws? [1] [1]: https://mobile.twitter.com/LukeXCunningham/status/1318982719922032641 https://mobile.twitter.com/LukeXCunningham/status/1318982719...

clairity 6y ago

this is what it looks like when concentrated capital is misallocated. you get one big flop instead of a bunch of small experiments that give you more bites at the red delicious.

jamesjyu 6y ago

I was thinking that this would be comparable to big movie flops. But no, even if you combine the 10 worst flops in history, it's just shy of 1.2B.

jjmorrison 6y ago

It wasn't necessarily all spent. The team likely made a decision to return the capital left if the traction really wasn't there.

bluedevil2k 6y ago
I read in another article they had $800M left to give back to investors

rsp1984 6y ago

They launched the thing to the public 6 months ago. Started building it and acquiring content much earlier though. That's where most of the $2B went.

dahart 6y ago

> A starting investment of that size probably qualifies it for a record in the fat (as distinct from lean) startup size category as well. With that kind of funding, and given who the founders are, maybe “startup” shouldn’t be used at all? The linked article didn’t use that term, and I mean, a startup that becomes worth $1B is called a “unicorn”, and this venture was launched with more funding than that.

Osiris 6y ago

Given how much Netflix and others spending on producing content, I wouldn't be surprised if most of the money was spent on content.

Impossible 6y ago

It's funny that people are so anti-AR/VR that they called Magic Leap a scam for raising $3B, but a 10 minute video streaming app that burns through $2B in 6 months is completely legitimate? I understand that content can be expensive, but Magic Leap did produce actual consumer hardware, and Microsoft and others have spent similar amounts to make comparable hardware. I'm not saying that Magic Leap is a successful company by any stretch, but if ML is a Theranos style scam, then Quibi was as well.

deleted 6y ago
[deleted]
Traster 6y ago
The reason Magic Leap was called a scam is because they demo'd technology that seemed too good to be true and then never produced a consumer product that delivered that demo. That's why people described it as a scam- there was no good faith understanding they could deliver what they promised. Compare that to Quibi where they have a platform, they have the content that they paid for. The problem isn't they promised something they can't deliver, the problem is they delivered something no one wants. It's not difficult to see how you'd pour billions into original content and a distribution platform. Netflix does that. It's difficult to understand how a company can show you a fantastic demo, spend billions on development and then produce a product that doesn't even slightly live up to the demo.

treis 6y ago

>$2B gone in 6 months must be something of a record for burn rate 2 billion is chump change for the market they're in. Netflix is spending 15 billion a year on content, Amazon and Apple like 6 billion a piece, and Hulu is around 3. Cash burn is similar. Netflix is 10s of billions in the hole since they were founded and continues to burn a few billon a year.