Explained: Quibi was supposed to be entertainment’s next big thing. Why is it shutting down?

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Short-form video streaming service Quibi, founded by Meg Whitman and Jeffrey Katzenburg- both high-powered technology and Hollywood executives- is shutting down, the Wall Street Journal reported on October 22. Quibi targeted as an alternative to Netflix and Amazon Prime but with the premise of TikTok, raised $1.75 billion before it had a single product live. Moneycontrol breaks down why it was so promising, what went wrong, and what it tells us about the content and streaming industry at large.

Okay, what is Quibi?

Quibi is a subscription-based streaming service (we know lots of them), short for quick bites. Unlike other streaming services, Quibi proposed shows with small episodes- ten minutes or less, made especially for mobile devices, and aimed for consumption on the move. In the metro, in an Uber- a style of consumption that was becoming increasingly popular especially for younger audiences- millennials and Gen-Z consumers.

Who are its founders?
Meg Whitman- former CEO of Hewlett Packard (HP) and a board member of companies such as Dropbox and Procter and Gamble; and Jeffrey Katzenberg- a former senior executive with Walt Disney Co., and who ran Dreamworks- the animation studio behind Kung Fu Panda and Shrek among others. 64-year-old Whitman and 69-year-old Katzenberg are both highly regarded executives with a history of successful stints.

So what were their shows? Did they get the big names?
Quibi released short-episode series, movies broken into chapters. In the initial days of any content play, having big names lends credibility, when the quality of content is still unknown. And Quibi had a lot of big names involved. This included Most Dangerous Game- a dystopian thriller starring Liam Neeson; a show produced and written by top comedian Bill Burr, a stunt challenge series starring Idris Elba, and shows and documentaries executive-produced by Dwayne Johnson, Steph Curry, and Trevor Noah. Other names associated with Quibi shows were The Big Bang Theory’s Jim Parsons, BoJack Horseman’s Will Arnett, Iron Man director Jon Favreau, and many more.

That sounds promising...
It was. That’s why over two years, Quibi managed to raise $1.75 billion from investors such as Chinese giant Alibaba and various Hollywood studios. To get early traction, Quibi was not relying only on subscriptions, like Netflix. It was toying with a freemium model, where users can also see advertising-supported shows, similar to regular TV or YouTube. It had even booked $150 million in ad revenue from Walmart, Pepsi Co., and Taco Bell, among others.

So what happened?
Despite the promise on paper, there were always doubts. From the beginning, there were questions on whether people will really pay for 10-minute episodes, and whether TikTok’s success- which unearthed the potential of short-form video- can be applied to serialized storytelling and premium programming. There were even reports that Quibi picked some scripts after they were rejected by every other network. After it officially launched in April, there has been a stream of reports detailing differences in opinion between the two founders, a serious lack of traction, and cold reviews for many of its shows.

And what about the pandemic?
Ah yes. The COVID-19 pandemic gave almost all online content a big boost as people were staying at home and consuming more content than ever. Movies, shows, podcasts, you name it. Except, Quibi was custom-made for a world where people are on the move, in a hurry, and have a short attention span. During a pandemic where everyone is at home and time becomes a huge blob, that thesis obviously struggled. Although Quibi eventually let people watch their content on televisions, the pandemic certainly played a part in its unraveling.

Anything else that went wrong?
Almost everyone agrees that the fundamental idea does hold some promise. But many questioned the big bang nature of Quibi’s execution, burning millions of dollars on little-known premises and shows,marketing aggressively, and building a startup with the deep pockets of a conglomerate, and not frugally. For a service aimed at younger audiences, one analyst also wondered whether two people in their 60s are the right ones to execute that vision. To be fair though, many Hollywood executives are on the older side and even Katzenberg has a proven track record.

So, what now?
Quibi employees are being laid off and paid severance, and the founders are returning $350 million back to investors. The idea behind Quibi either “wasn’t strong enough to justify a stand-alone streaming service” or the service’s launch in the middle of a pandemic was particularly ill-timed, Whitman and Katzenberg wrote in a letter, WSJ reported. Quibi tried selling the company as well, but Quibi doesn’t own the rights to many of the shows on its platform, which put off potential buyers.

It is also fighting a lawsuit filed by another video company Eko, which claims Quibi is violating its patents and has stolen trade secrets. Activist hedge fund Elliott Management is financing Eko’s lawsuit. The fight centers on a key feature of Quibi’s app that plays different videos for users depending on whether they are holding their phone horizontally or vertically. Quibi has denied infringing on Eko’s patents or stealing trade secrets, WSJ reported.

What does this tell us about the streaming market?
Firstly, that it is fiercely competitive. The number of subscription-based streaming services are so many, it has begun to resemble the cable TV model which it was trying to replace. HBO, NBC, Disney, Hulu, Netflix, Amazon, Apple. And this doesn’t even count non-American services- important since streaming is a global market. Whether users would pay for one more service like Quibi without obvious quality upfront, was always in doubt.
Unlike some sectors, you also cannot throw money at the problem. None of Quibi’s billions raised came to its rescue, when its shows simply weren’t working and the user base was far lower than expected.
And lastly, while TikTok is a breakthrough success, its success is extraordinarily hard to replicate, as many Indian startups are finding out after TikTok was banned in India. Just replicating the short-form video thesis is simply not enough. Although Quibi was not a social media platform, it still missed the virality that all content platforms thrive on- something TikTok mastered.