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Notes on the business of media, entertainment, & gaming.
by Eric Peckham | June 24, 2020

Hi everyone - I published an article yesterday about Quibi's rough start, relative to the amount of capital raised and spent. I'm a big believer in the opportunity for mobile-native content formats so sad to see it. I highlighted four main issues I saw:
  1. Miscalculating the risk of launching during the COVID-19 lockdown.
  2. Undervaluing the central role of interactivity in mobile-native entertainment (and overvaluing short content lengths).
  3. Creating misaligned financial incentives with the wrong content partners.
  4. Launching Quibi like a movie instead of like a startup.
The misalignment of financial incentives is something that jumped out at me in particular. Quibi aimed to pioneer a new content format, but it turned to the biggest names in traditional film/TV to do so...the "incumbents" who have the least need to innovate and the greatest opportunity cost on their time.

Quibi's deal terms to lure VIPs let them repurpose their content for traditional film/TV formats after 3 years. It reduced the risk of their time being wasted on a project for a startup that flops, but it also created a disincentive to innovate a new format. Producers want the ability to repurpose their content so naturally create a Quibi show that's not that different from traditional TV.

Aligning incentives would have meant focusing the deal on financial upside for creating a hit in a new format. The biggest names in Hollywood probably wouldn't have bought into that, but rising star creatives looking to make a name for themselves would have...and that's the better group to turn to in taking risks and pouring time into experimentation.

It's always a red flag when startup founders say they need big celebrities involved; it hints that the product isn't differentiated and compelling enough to excite consumers on its own. Quibi seems to have way over-indexed on thinking VIPs were the key to helping its content stand out rather than using its funding to take more risks (and more time) in product/production innovation.
The US suspended H1-B visa applications through the end of the year. I've written about this before, but expect it to only accelerate the flow of technical talent in our industry to offices in Canada and Europe. The strictness and unpredictability of US immigration policy has created a strong incentive to open an office outside the US sooner than companies have done in the past.

It should also encourage media-/gaming-focused VCs and corp dev teams to spend more time tracking startups abroad due to the combination of fewer entrepreneurs immigrating to the US and more talent becoming available to hire in key hubs like Toronto, Montreal, London, Stockholm, Berlin, etc.
Interesting Deals, Stats, & Product Updates
Digestible Media

  • Tencent is acquiring Iflix, a leading VOD service in Southeast Asia and the Middle East with 25M MAUs across 13 markets. (Read more)
    • The Kuala Lumpur-based company raised $348M in outside funding since 2014. It's IPO in Sydney was canceled when the market crashed due to Covid-19.
    • Variety reports the acquisition price is in the "tens of millions" which is a steep cut from prior valuations.
  • FuboTV added ESPN and ABC channels to its OTT subscription. The addition of ESPN is a huge win for Fubo, which has anchored itself in live sports content. (Read more)
  • Disney says Disney+ will expand to 8 more European countries on Sept 15 with prices in the €7-8 range depending on country. (Read more)
  • Snap announced an interactive, shoppable show on Snapchat. (Read more)
  • Pixellot, an Israel-based provider of automated video production technology for sporting events, raised $16M from Shamrock Capital and other investors. (Read more)
  • NENT Group and Finland's Elisa Viihde are forming a JV to combine SVOD offerings in Finland. (Read more)
  • Saban Music Group, the music group announced last July with $500M in backing from Haim Saban and a focus on developing international artists from LatAm and other regions, signed a global admin deal with Universal Music Publishing. (Read more)
  • Wondery, the LA-based podcast studio, launched its own podcast streaming app. (Read more)
  • iHeartMedia signed a deal with WarnerMedia to produce companion podcasts for HBO Max shows. (Read more)

Interactive Media

  • Treehouse Games, an LA-based game studio focused on collaborative games, raised $2.6M in seed funding from London Venture Partners (LVP), Transcend Fund, and Kristian Segestrale (CEO of Super Evil Megacorp). (Read more)
  • Epic Games' portal for buying and playing PC games, the Epic Games Store, hit 61 million MAUs this past month. It sunk money into free give-aways of popular games to lure new users. (Read more)
    • By comparison, Valve's Steam portal (the longtime market leader) had 91 million MAUs at the end of last year.
  • Absolutely Games unveiled itself as a new UK-based studio led by serial gaming entrepreneur James Brooksby. Rebellion and Cedric Littardi provided seed funding. (Read more)
  • Activision Blizzard and Tencent's Call of Duty: Mobile has had 250 million downloads since launching in October. (Read more)
  • EA renewed an exclusivity deal with La Liga to include the Italian soccer league's teams and players in the FIFA game franchise. (Read more)
  • Unity made its full library of educational courses for learning how to use Unity free. (View here)
  • Facebook acquired Ready at Dawn Studios, the VR studio behind the Lone Echo game franchise that has offices in Irvine, CA and Portland, OR. Its Facebook's third acquisition of a VR studio in the last year. (Read more)
  • Facebook is discontinuing production and support for the Oculus Go headset. (Read more)
    • As the first decent cordless VR headset, it marked an important stepping stone, but it was underwhelming in tech specs and content offerings. The newer Quest headset is the substantially improved update to Go.
  • The European Commission released a two-year review of GDPR saying the data privacy law is working but there needs to be far more resources devoted to enforcing of it. (Read more)
Reply with submissions, comments,
corrections, and ideas.

Chat on Twitter: @epeckham
Copyright © 2020 Eric Peckham, All rights reserved.

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