T-Mobile has taken a gamble on short-form SVoD content in the US. A recent partnership with unlaunched mobile-first video service Quibi, sees the MNO trying to further establish itself as a content aggregator. Quibi (formerly NewTV) offers original, short-form content with a high production value.
Currently, details of the partnership are vague. T-Mobile holds the title of Quibi’s ‘exclusive wireless distributor’ for when it launches in April 2020. Despite this title, we think it is safe to assume that an OTT start-up which has received over $1 billion in funding from major Hollywood studios is not going to limit itself to the customer base of one MNO for long.
Quibi will exclusively offer short-form content, with episodes running between 7-10 minutes. A $5 a month sub will get you one or two short adverts per episode, while $8 a month lets the user watch without ads. The platform will be available exclusively on mobile devices.
Faultline wrote disparagingly about Quibi back in 2018, when it was under its old guise of NewTV. We paralleled the emerging platform with its, then recently failed, counterpart, Verizon’s Go90. Among the disdain, we did note that the newcomer had at least two differences – a seemingly more mature target audience, and a reliance on network roll-outs, rather than original content.
One year later, it appears both distinguishing factors have disappeared. Quibi is actively targeting millennials – those in the 25 to 35 age range – just as Go90 did. The platform is also now exclusively rolling out original content, hoping that huge budgets and big names will distract from a sense of déjà vu.
This deal sees T-Mobile continuing its revised strategy of becoming a content aggregator, albeit with a questionable partner. Just a year ago, we were expecting the MNO to become a video-disruptor by launching its own SVoD service, yet this never came to light. Nonetheless, we said T-Mobile was well suited to the aggregator model due to its reach and reputation.
The financial terms of the Quibi deal remain undisclosed – neither company has revealed any terms of exclusivity. We believe the likely result of this partnership is that T-Mobile’s 83 million customers will receive discounted subscriptions to Quibi’s service, widening Quibi’s subscription base from its launch.
However, it is unclear quite what T-Mobile will gain from the deal. While we had assumed that data on viewing habits would be a natural incentive for T-Mobile, Quibi CEO, Meg Whitman, late of HPE and eBay, has been vocal about her opposition to mining and monetizing user data. “It’s just on the wrong side of history”, Whitman told The LA Times in August. With Whitman predicting that up to 75% of users will opt for the $5 subscription – with partial advertising – perhaps T-Mobile is receiving a cut of the advertising revenue.
Although fraught with issues, the deal is nonetheless a refreshing move from T-Mobile – its rerouted path into video aggregation has not been as slick as it would hope. The MNO’s last notable brush with a content platform was the underwhelming distribution deal with Viacom and its old-hat channels.
Similarly, the launch of its DTH service, TVision Home, in April, failed to attract the headlines one would hope from a major MNO disrupting a new market. This was in part due to measly pricing – services started at $90 a month, with the average US cable bill coming in at $107.30 a month. Most were expecting it to attack the skinny bundle market at the $25 a month mark. The partnership with Quibi realigns T-Mobile alongside a fresh player in SVoD.
As the demise of Go90 reminded us, short-form content alone is not a unique selling proposition (USP) and this is increasingly the case under the tyranny of YouTube and Facebook.
Quibi founder, Jeffrey Katzenburg, believes it is the quality of the content that will set the service apart, by “staking out a premium position relative to those” AVoD competitors such as Facebook and YouTube. Yet a prime cause of Go90’s decline was an over-investment in content.
Advertisers seem equally confident in the platform. Over $100 million of advertising time has been pre-purchased by sponsors and Quibi aims to have an ad inventory of $150 million in its first year. This will be placed among the 7000 ‘content pieces’ (individual episodes) that Quibi aims to upload in year one.
T-Mobile has been a disruptive player in the US mobile video market. The Binge On initiative proved controversial in 2015 by providing zero-rating video streaming to all customers. This ruffled some feathers due to the reduced streaming quality and complaints about its positioning against net neutrality.
While most players in the US market upscale their content – across high-budget, long-form original and classic pieces – Quibi is pinning its hopes on a growing appetite for short-form video and viewing on mobile devices. The service is mobile-only, with original content filmed and edited so that it may be viewed horizontally and vertically on a phone.
Consumer trends do appear to be heading that way, but the US SVoD market is already very crowded. Given previous attempts, we can’t imagine that Quibi’s USP of exclusively short-form content will be enough to convince US consumers to part with more of their cash for a service that completely reshapes their viewing habits.
The deal is preceded by AT&T’s acquisition of Time Warner, which is set to launch its HBO Max OTT service in Spring 2020. We are glad to see T-Mobile trying to establish its patch on the OTT market, but it has chosen a rather peculiar spot. We remain unconvinced that even a major US MNO can help Quibi become ubiquitous.
“Of course Quibi and T-Mobile are working together – we’re two mobile-centric disruptors committed to challenging the status quo and giving customers incredible experiences”, said T-Mobile CEO, John Legere.
Meg Whitman, Quibi CEO, commented that “a telecommunications partner like T-Mobile, with its broad coverage today and impressive 5G roadmap, is the perfect fit.”