Why did the streaming video service Quibi fall?

Summary

• Short-content streaming network Quibi will soon end its business operations, just after half a year of its existence.
• Quibi creators Jeffrey Katzenberg and Meg Whitman updated the market on 21 October adding that they had explored all possible options before making a call.
• The streaming platform’s fall can be attributed to various reasons. Lack of innovation, unfortunate launch timing due to the pandemic, and intense competition were the most significant reasons.

A once-promising idea that was supposed to transform the entertainment industry and Hollywood itself, Quibi is now a long-forgotten project that tumbled sooner than anyone could have ever expected.

When the world found about the project with the famous film mogul Jeffrey Katzenberg behind it, no one suspected it would collapse so quickly. With the founder being an icon for more than 25 years and having held the position of a Chairman at Disney for a decade – what could go wrong with Quibi?

Mr Katzenberg wanted to revolutionise the idea of consuming streaming platform content as people were stuck at home during the pandemic. A former eBay and Hewlett-Packard CEO, Meg Whitman, joined the innovative concept behind Quibi, which received funds worth US$1.75 billion from investors such as Warner Bros, Disney, BBC Studios, MGM, Lionsgate, and NBCUniversal.

The creators were advised to create an app for all smart devices, including TV and smartphones. However, Quibi founders did not follow the professional advice and instead listened to their hunch.

Driven by intuition, Mr Katzenberg and Ms Whitman thought the streaming platform available for smartphones only could be nothing else but a success. Yet, their instincts proved them wrong – Quibi launched in April 2020 and decided to shut its doors just six months later in October. The fall of Quibi is now considered as one of the most significant (if not the biggest) in the whole Hollywood industry.

What is (was) Quibi?

The name Quibi is a jumble of two words – quick and bites.

The streaming platform was supposed to bring short content (usually between five to seven minutes in length) for scripted and unscripted shows. There were two types of subscriptions, with ads (US$4.99) and without ads (US$7.99).

What did the experts say?

Some experts argue that Quibi had significant flaws in its idea, starting with limited reach and finishing with the release timing.

The creator duo genuinely thought the smartphone app would be successful on its own, providing outstanding storytelling and content. But what they did not think about was that many of those apps were already available, free-of-charge.

YouTube, being a key competitor, offers similar service at a small cost – watch advertisements before the main content begins. Paying US$4.99 for Quibi or having to wait a minute before getting a chance to watch your preferred content free – say no more.

Another challenge for the Company was the coronavirus pandemic. Streaming platforms like Netflix and Disney+ reached their peak as individuals were looking for a new way of fun. Being locked in home and spending most of the time as a couch potato increased streaming sales. Considering the scenario, launching another streaming app sounded like a rational move. The reality, however, was quite different and made Quibi surrender.

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What did Mr Katzenberg and Ms Whitman expect from Quibi?

The pair designed Quibi to offer the next level of experience to the entertainment industry. Having quality content on the go was a masterplan meant to attract younger generations, as they cannot leave smart gadgets for more than an hour. If that.

The duo hired top technology specialists, who had experience working with the competitors (Snap Inc., Netflix, and Hulu), to build up the platform. However, since the very beginning, third-party advisors were not sure if Quibi would be as revolutionary as first thought.

Advisors suggested that streaming platform should implement a form of embedded sharing, as YouTube and TikTok were a couple of successful initiatives with a similar draft. The US has strict laws about intellectual property, so in reality, the plan could not be implemented. Instead, Quibi offered the feature of taking still shots in-app and then sharing them to other channels.

Apart from operating a high-tech streaming platform, Quibi injected big bucks in famous names and good storytelling skills. Actors like Liam Hemsworth and Anna Kendrick were probably the most famous on-screen personas that were meant to push Quibi to its peak.

What were Quibi’s expectations regarding subscriber base and cash in hand?

According to some sources, Mr Katzenberg and Ms Whitman predicted that Quibi would have nearly 7.4 million subscribers in the first year. However, the platform ended up with only 450,000 long-term subscribers.

The Company believes it would have spent over US$1 billion by 2021 beginning and had US$750 million worth of cash in hand by October end. However, US$350 million would have gone to the investors.      

Did Quibi have a getaway plan?

In their 21 October announcement, the founders explained that they tried to do everything in their power to keep Quibi alive and going. As they could neither find a sustainable solution nor the funds needed for a boost, the produced content is now on sale, available for anyone interested with enough cash to purchase it.

There were many alternatives for the streaming service to bounce back, but the ideas did not have a solid ground. For example, there were options of transitioning Quibi to a model where most TV shows and movies would be available for free. The premium content would be exclusive for individuals that are willing to pay.

After calculations were made, the freemium model would have required Quibi to arrange a breath-taking US$2.4 billion worth of capital by 2024. In 2021 alone, Quibi would need US$400,000.

The partners were also open for Quibi partnerships or for selling the business. Neither of those realisations took place.

What caused Quibi to fall?

A high-potent combination of reasons likely caused the youth-oriented platform to fail. However, there are a few reasons that seem more likely to have contributed to the fall than the others.

First of all, Quibi was not an innovative idea. Yes, it might have been led by world-class executives and had a great movie mind behind it, but overall, the plan lacked solid ground. After paying US$4.99 for a subscription plan that still had ads popping out, not many individuals were encouraged to keep using it after the trial period. The youth is used to paying for what they get, but Quibi did not tickle their imagination.

Secondly, Netflix, Hulu, HBO To Go and others had already proven themselves and posed a significant threat. The streaming platforms have existed for a long time and gained a loyal audience that is hesitant to try something new. The trio also invests a lot of money in the original content production, so consumers usually did not mind even if subscriptions became a bit more expensive.

Thirdly, the COVID-19 pandemic was an important reason why Quibi failed. Industries around the globe, especially entertainment, were put on a break. Celebrities were reluctant to take new projects because no one would consume them. Thus, there was no new content created for a few months. There are some speculations that Quibi could have succeeded if people were going out more frequently, but with the pandemic still knocking on the door, Quibi had no chance.