Poor Execution, Not Content, Spawned Quibi's Abrupt Collapse, Say Analysts
Quibi, the short-form video service founded by Jeffrey Katzenberg in 2018 and headed by former HP CEO Meg Whitman, was a “bad idea -- that inexplicably -- managed to raise $1.75 billion” in funding, Brightcove analyst Jim O’Neill emailed Thursday, reacting to the service's shutdown after only six months. In a joint letter to employees, investors and partners Wednesday, Katzenberg and Whitman announced they're “winding down the business” and seeking buyers for Quibi’s content and technology assets.
They said the goal of Quibi, originally called NewTV, was to create a new category of content -- short-form entertainment for mobile devices -- but circumstances weren’t right for Quibi to succeed “as a standalone company.” They cited two possible reasons: “because the idea itself wasn’t strong enough to justify a standalone streaming service or because of our timing” during a pandemic. But, they said: “Other businesses have faced these unprecedented challenges and have found their way through it. We were not able to do so.”
Though Quibi was a good outlet for experimenting with content creation, “commercially, it was destined to fail,” O’Neill said, adding that Quibi management “totally misread the market,” ignoring data about how consumers view content and jumping into the space “without adequate research.” In a January prediction, O’Neill blogged that the outlook for Quibi -- which launched in April at $5 monthly with ads, $8 without -- was “not so good.” He wondered how the service would justify the subscription price and questioned how it would engage consumers long term.
Quibi management falsely assumed because “Gen Edge and Millennial viewers consume a lot of YouTube content that they’d do the same” with what the service considered premium content, “assuming users want short-form content,” O’Neill said Thursday. Millennials are actually the most avid moviegoers, said the analyst, referencing research showing they want to watch long-form content on larger screens. “They want to binge,” he said, “and they don’t always go to their phones to watch.”
Amid a crowded video streaming market, O’Neill downplayed competition for eyeballs as the reason for Quibi’s demise. “There will always be pundits who declare the video market saturated, who contend consumers have too much choice and aren't willing to pay for content,” he said. Subscription- and advertising-based VOD services continue to come to market, he said, citing the recent success of Disney+ with “huge demand, huge signups.”
Parks Associates analyst Steve Nason wasn’t shocked Quibi closed shop but was surprised it happened after only six months. He cited contributing factors including “outsized expectations” and a patent infringement lawsuit brought by Eko: “They couldn’t get out of their own way.” Quibi’s vision of itself as a short-form version of Netflix was unrealistic for what was a niche category that would never generate the subscriber numbers required to make it profitable, Nason said.
As recently as this week, Quibi was fighting mixed messages, Nason said. It announced Monday it planned to take the service to connected TVs to widen its base: “That should have been done at launch,” said the analyst. “It was very short-sighted.” The Quibi failure stands out from other services that were doomed because their content didn’t connect with users. That wasn’t the case with Quibi, which nabbed 10 Emmy nominations. “Content wasn’t the issue,” Nason said.
In the Wednesday letter, Quibi management called the service “a big idea” whose failure “was not for lack of trying.” Management listed among their accomplishments opening a door to “the most creative and imaginative minds in Hollywood to innovate from script to screen," saying content “exceeded our expectations.” Engineers built a mobile platform that enabled a new form of storytelling, and “we were joined by ten of the most important advertisers in the world who enthusiastically embraced new ways for their brands to tell their stories.”