A look at why Quibi failed so soon after launching

Ahiza García-Hodges
·7 min read

Streaming service Quibi — short for "quick bites" — was touted by its co-founders Jeffrey Katzenberg and Meg Whitman as a platform that would radically transform the way people, in particular younger viewers, consumed content on the go. Yet just six months after launching their new company, the duo announced Wednesday it would be shutting it down, after failing to gain traction with subscribers.

While the project faced skepticism from the beginning, it was highly anticipated because of Katzenberg's reputation as a Hollywood heavyweight. As former chairman of Walt Disney Studios and a co-founder of DreamWorks Animation, the consensus seemed to be that if anyone could disrupt mobile viewership patterns, as Quibi hoped, it would be Katzenberg.

It is impossible to pinpoint exactly why Quibi failed, but several factors likely contributed to its downfall, including content that failed to generate buzz, an inability to grow its subscriber base, the Covid-19 pandemic and the competitiveness of the streaming landscape.

While discussing Quibi's failure on a call with investors and in an open letter Wednesday, Katzenberg and Whitman cited the unique environment created by the Covid-19 pandemic and the possibility that their idea wasn't suitable to be a standalone subscription service.

No doubt the pandemic played a role in Quibi's inability to resonate with its intended users.

It was designed to disrupt mobile viewing and was built around the idea that short, five- to 10-minute episodes of shows would appeal to users on the go. The idea was that these short episodes would be like chapters in a book, allowing people to briefly tune in and get concise but complete pieces of content.

However, before Quibi launched in April, the Covid-19 pandemic resulted in restrictive stay-at-home orders throughout much of the country. The on-the-go audience Quibi was designed for now found itself stuck at home, no longer commuting and limiting outdoor activities. People eager to consume content were no longer restricted to only doing so on their mobile devices during the day.

That was problematic since Quibi was built to be accessible solely on mobile devices. There wasn't initially a way to consume its content on a television. Eventually, Quibi was forced to adjust its model and allowed subscribers to use AirPlay and Chromecast, and on Tuesday the company launched apps for Apple TV, Android TV and Fire TV.

In June, Katzenberg said he attributed "everything that has gone wrong to coronavirus." However, in an appearance on Thursday on CNBC, he walked back those comments, saying it wasn't "fair" to put all the blame on the pandemic.

When asked whether he would temper his earlier comments, Katzenberg said "100 percent. It’s not fair. It was a little bit of a flippant answer at the time."

"Other companies have faced the challenge of Covid and they’ve managed to find the path," Katzenberg said. "I think Meg and I believe in owning our miss, simply blaming it on Covid is not fair and not something either of us want to do."

As Katzenberg conceded, the pandemic wasn't the only source of Quibi's problems.

The streaming landscape Quibi was seeking to disrupt is full of heavy hitting competitors like Netflix and Amazon, which have massive budgets. While Quibi raised $1.75 billion from investors, it wasn't enough to compete against the financial resources of bigger companies.

"There’s no question being a startup has challenges that big companies don’t have, and there’s no question that we had to launch in a big way. Everyone understood the business case for Quibi and that it was going to take a lot of capital up front," Whitman told CNBC.

In June, it was reported that Quibi expected to have spent $1 billion of the $1.75 billion it had raised by the third quarter of 2020. The company projected it would need to raise an additional $200 million by mid-2021 to stay viable.

Quibi also lacked the advantage held by newer subscription services like Disney+, HBO Max and NBCUniversal's Peacock, which had deep catalogues of content that was already popular with loyal viewers. (NBCUniversal is the parent company of NBC News and is a minority investor in Quibi. NBC News produced a daily show on the platform.)

Instead, Quibi planned to rely solely on original content with A-list stars serving as actors and producers. But that meant it would need at least one huge hit to entice subscribers. While engaging shows from the likes of Kevin Hart, Jennifer Lopez and Steven Spielberg may have entertained viewers, they didn't result in the growth numbers Quibi needed to be successful.

"It is really hard to break in now as a new player on the content side, especially as a subscription app without a free initial offering," said Rich Greenfield of media research firm LightShed Partners. "But if there was must-have content that people couldn't live without, they would have subscribed. The numbers speak for themselves."

Early on, Quibi projected it would have more than 7 million subscribers by the end of its first year. However, in May, downloads were already lackluster. While Quibi didn't offer a free tier, opting instead for one paid subscription price point, it did attempt to win over new users with a 90-day free trial. In the first month after launch, Quibi had 2.6 million installations, according to SensorTower's data on mobile apps. Quibi itself put the number at 3.5 million downloads, with 1.3 million active users.

Those numbers didn't reflect paying customers who chose to use the service once the free trial had ended. As of a few weeks ago, Quibi reportedly had just 500,000 subscribers.

"I don’t know if we’ll ever really know why it didn’t work but I think getting consumers to use another app is a real challenge, it is very, very difficult," Greenfield said. "Getting consumers to use new apps, to download, to keep coming back and regularly use and want to pay for is a real challenge."

There were also issues related to the actual app.

People complained about the inability to screenshot content, which meant it was difficult to share on social media and generate potentially helpful buzz around shows. While that's not an issue unique to Quibi, it was one more pain point that added to its vulnerabilities. Quibi did eventually fix the issue — but not soon enough.

The technology Quibi touted as a key point of differentiation from competitors, the ability to switch in real time between horizontal and vertical viewing, clearly didn't prove attractive enough to incentivize enough people to subscribe. Plus, the technology was quickly challenged in court over allegations of patent infringement, which Quibi denies.

Ultimately, Katzenberg and Whitman acknowledged that the "product market fit was wrong" and that their efforts weren't going to be enough.

"Over the summer we started to see a slow down in our momentum and we tried many different things, many different packing models, we changed our marketing, we changed the app around many different times but it was clear for whatever reason that this wasn’t going to be as successful as Jeffrey and I had hoped," Whitman said on CNBC on Thursday.

"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 to make this a successful business."

Katzenberg and Whitman are now working to wind down the company and return money to investors.