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A startup headed by industry stalwarts, operating in a market that has exponentially grown in the past few years, having funding of around $1.75 billion from investors that officially launched its service in April 2020 is shutting its doors within 6 months of its launch. This is Quibi’s tale involving huge risks, huge stakes, ultimately resulting in huge losses.
Quibi, a buzzy mobile-video startup is the brainchild of the hugely successful Jeffrey Katzenberg, the co-founder of DreamWorks, with the former eBay and Hewlett Packard boss Meg Whitman as chief executive. Quibi’s backers included all the big Hollywood studios, Goldman Sachs, JP Morgan Chase, Google, Alibaba, billionaire Carlos Slim, and even ITV. “[Quibi] brings together the best of Silicon Valley and Hollywood,” Katzenberg boasted. “What Google is to search, Quibi will be to short-form video.”
However, within 6 months of its launch, the startup has crashed and burned. The shutdown happened one day after the service became available on Apple TV, Android TV, and Fire TV.
What was Quibi Really?
To understand what exactly did Quibi (which is short for Quick Bites) promised to deliver and what created the hype around it we’d have to follow Quibi’s story since its inceptions in 2018. In August 2018, Jeffrey Katzenberg and Meg Whitman created NewTV (now known as Quibi), a digital video startup that aimed to create "snackable" short content for smartphones. That month, NewTV revealed it had secured $1 billion in funding from big names including Walt Disney, Warner Media, and Alibaba Group. For the next 18 months, up until February 2020 when consumers got their first look at Quibi when it became available for pre-order on App Store, Quibi was riding the hype train. BBC invested in Quibi, Quibi had advertisers such as Taco Bell and Pepsico lined up for its entire first year of operations, the firm was now poaching talent from Snapchat and Netflix and had also taken a 10-year lease for office premises in Los Angeles.
What Quibi promised to deliver to its consumers, for a price of $4.99 per month (with ads) and $7.99 for its ad-free version, were episodes and films which would only be 10 minutes long and aimed at people wanting to watch something on their phones while they're out and about. Quibi co-founder Jeffrey Katzenberg said earlier this year that the people using his product might be "in-between home-schooling or doing chores around the house, or answering emails and being on video chats". One of Quibi's more interesting aspects was the content was specifically filmed and produced to be watched in full screen on your smartphone, regardless of whether your device was vertical or horizontal.
(Credits: IndieWire)
With Pandemic Came the Reality Check!
Quibi positioned itself somewhere between short video platforms such as TikTok and Instagram and full-fledged serious TV making platform like Netflix, Disney+ and Apple TV. But what it couldn’t do is identify the right consumer segment for which it would be making shows and content. One of the problems of the business model is that it simply failed to deliver content in a way people that want to consume it. Bite-size content tends to be the domain of free, mostly user-generated, models, such as Facebook to TikTok. Paid content models, from TV to Netflix, work because consumers want full-length programs and films. Quibi tacitly acknowledged this with a belated attempt to get the app on to TV platforms including Amazon’s Prime Video and Roku.
What amplified the issues was the Pandemic and the subsequent lockdowns which had proven to be a boon for other streaming platforms. Quibi wanted to be the go-to platform for people who were on the move. And guess what? Nobody was moving during the lockdown. People had tons and tons of hours to spend and consume, which they did, as can be concluded from the numbers which Netflix and other platforms registered during the platform. "The circumstances of launching during a pandemic are something we could have never imagined but other businesses have faced these unprecedented challenges and have found their way through it. We were not able to do so.” noted the founders in a Medium article authored by them.
Even Quibi’s last-minute effort to find a buyer was scuppered by a flaw in its model, with talks reportedly held with companies including Apple, Facebook, and NBC Universal, because it allowed rights to shows it funded to be owned by the content creators. In recent years Netflix has shifted billions of dollars of content budget to making original programming to ensure that it can maximize income from its content.
A Sad End for a Promising Platform
Quibi had got everything wrong that could go wrong for a streaming platform. With numerous branding and legal issues, faulty pricing strategy, and a fundamental lack of audience understanding, Quibi was destined to lose in the long run. What Pandemic did is expedite the process of Quibi’s failure. Pandemic killed the entire supposed market and value proposition which Quibi was relying on. The combination of Quibi’s cost and a society in which people were not looking for ‘quick bites of content’ on the go, meaning that the service was about as far removed from pandemic-friendly as possible. It is far too speculative to ask whether Quibi would have done better in a climate unafflicted by a highly contagious novel coronavirus. But as described above, Quibi had foundational and existential issues that had nothing to do with the pandemic.
"We had a new product and we asked people to pay for it before they actually understood what it was. I think we thought there would be easier adoption," Katzenberg said. "In the end, we didn’t get the support of consumers and customers in the way we had to make this a successful business."
Katzenberg and Whitman are now working to wind down the company and return money to investors.
Dilip Mishra is a B.Com (Hons.) graduate from the University of Delhi and has previously worked with S&P Global Market Intelligence as a Data Researcher.