The Epic Fall of Quibi, a $1.8B Funded Startup shuts down in 6 months
Rakesh Soni
Founder & CEO | Helping enterprises deploy Customer IAM at scale | Engineer | IIT
This is my second article in the series, and I've got three more great failure stories to share before I spill the beans about my own experiences. In case you missed it, the first article was all about fall of Juicero, a $120M funded Silicon Valley startup. Check it out!
Quibi is probably one of the craziest failures in recent times, considering the amount of funding it received and the bigshot founders involved. It reminds me of Reid Hoffman's quote that "an entrepreneur is someone who will jump off a cliff and assemble an airplane on the way down." The truth is, it's incredibly challenging, no matter how much of a big shot you are or how much money you've raised.
Now, let's kick things off with a bit of background.
Elevator Pitch
“Quibi is a streaming service that offers original, short-form content for mobile viewing. With new episodes every day, it's a convenient way to stay entertained on the go. Whether you're looking for drama, comedy, or documentaries, Quibi has something for everyone. Subscribe to access all of Quibi's content on your phone or tablet.”
Founding Team
Quibi was founded by two industry stalwarts: former HP CEO Meg Whitman and veteran Hollywood executive Jeffrey Katzenberg.
Jeffrey Katzenberg is a film producer and media executive who served as the chairman of Walt Disney Studios and co-founded DreamWorks SKG. He played a crucial role in overseeing the production of numerous successful animated films, such as "The Lion King," "Beauty and the Beast," and "Aladdin." Before his tenure at Disney, Katzenberg co-founded DreamWorks SKG alongside Steven Spielberg and David Geffen, where he also held the positions of chairman and CEO. You can find more information about Jeffrey on his Wikipedia page.
Meg Whitman is a business executive and philanthropist renowned for her tenure as CEO of Hewlett Packard (HP). Prior to her role at HP, Whitman held leadership positions at several other major companies, including eBay, where she served as CEO for over a decade. During her time at eBay, Whitman played a pivotal role in transforming the company into a global e-commerce giant, solidifying her position as a highly influential figure in the business world. For further details about Meg, you can explore her Wikipedia page.
Funding
$1.8B total funding
Key investors
Product
Quibi was a premium video platform similar to Netflix, but with a focus on short-form videos, offering episodes of shows that lasted between five to 10 minutes. Their product offering revolved around two core components - Media Content and Technology.
To get a sense of what Quibi had to offer, watch their Superbowl commercial.
Media Content
Quibi offered entirely new under 10-minutes media content like comedy shows, reality TV, news, drama and so on. The short nature of content was intended to be watched while on go, like in the bathroom, during short breaks at work or activities, or traveling in local transit.
The company partnered with many studios and content creators to produce the star-driven and filmmaker-driven content and invested hundreds of millions of dollars. I could not find much information on the amount of content the platform had but here are some of the shows, lets see if you recall any of them – Dummy, about a young woman who strikes up a friendship with her boyfriend’s sentient sex doll, The Most Dangerous Game was a 90-minute movie starring Liam Hemsworth as a terminally ill man partaking in a big-city hunt in order to provide for his family; and When the Street Lights Go On was a murder investigation story.
Technology
Quibi was designed to be a mobile-only streaming service but they eventually expanded to other devices.
Quick was launched with Android and iOS apps. Then, they expanded their support to AirPlay and Chromecast to allow users to watch content on their televisions. Finally, a day before shutdown, they launched apps for Android TV, Apple TC and Fire TV.
The content was formatted for mobile phones to be viewed vertically or horizontally. This allowed users to seamlessly transition between portrait and landscape modes. That was definitely unique. However, Quibi faced a lawsuit from a well-financed competitor, Eko, over this technology.
Quibi Timeline
Fall of Quibi
Quibi, founded by two well-respected industry figures, has been the subject of much discussion since its inception. The founders generated a lot of excitement and established an ambitious vision for premium short-form media content intended for on-the-go consumption. They chose an eye-catching name, with "Quibi" standing for "Quick Bites."
Quibi's founders, Jeffrey and Meg, continued to generate excitement and enthusiasm as they cultivated a strong community of influential investors, major media companies, filmmakers, and actors around their vision. While they were unable to raise a vast amount of funding and produce a large volume of content in a short time frame, the company was able to secure two rounds of funding totaling $1.75 billion from major media houses and venture funds.
Then, something unexpected happened. World experienced a major pandemic after a century, leading to lockdowns in March 2020, a few weeks before the target launch of Quibi. The idea of people consuming short-form premium content on-the-go was fundamentally challenged as people were required to stay at home. Despite this, Quibi officially launched its platform in the US and Canada on April 6, 2020.
To attract users, Quibi offered free subscriptions for the first 90 days and then charged $5 per month with ads or $8 per month without ads. According to SensorTower, the company had approximately 2.6 million installations in its first month of service, while Quibi itself claimed 3.5 million downloads and 1.3 million active customers. These figures included both free and paid customers. However, a few weeks before the company's official shutdown, it had only 500,000 subscribers, generating around $3 million in monthly revenue, which was only 30% of its projected first-year goal.
On October 22, 2020, the founders of Quibi made the surprising announcement that they would be shutting down the company, just six months after its launch. They cited the COVID-19 pandemic as the cause of their failure and decided to give the remaining $300 million back to their investors. In an effort to recoup some of their losses, they also began searching for buyers for their content.
That was a short story but let’s analyze the core reasons for failures.
Founder Fuck-ups: Why Quibi Failed
It is definitely hard to point to one main reason but after analyzing, I found 7 core reasons that contributed to the fall of Quibi.
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Terrible Product (Content)
Content is king in the streaming world where customers have a plethora of options. Quibi invested an immense amount of money (~$1B) in Hollywood talent and studios, yet they were unable to create shows and movies that were truly memorable. None of the programs went viral and generated widespread buzz, something that is necessary for a successful streaming service to thrive.
Additionally, their 'Daily Essentials' program which featured recaps of late night shows and sports updates, was nothing that couldn't be found on YouTube - and for free. In the end, mediocrity in the content was one of the primary reasons why Quibi was unable to attract and retain subscribers.
Pandemic Changed the Market
The wrong timing is among the most serious reasons why a startup fails. Quibi was conceived at the right time, yet Mother Nature had other plans. The emergence of COVID altered the way people consume content, shifting from on-the-go viewing of short-form content on mobile phones to at-home viewing of long-form content on larger devices such as Computers, TVs.
What did this signify for Quibi? Since people were in their homes, they had more time to watch longer videos and could access them on devices other than their phones such as Tablets, Computers, and TVs. This went against Quibi's original thesis of a streaming service for mobile-only, short-form content.
COVID flipped the world around for Quibi, but it could have been a chance to modify and survive. Instead of pivoting to adapt to the changing market, Quibi failed to align with these forces, ultimately leading to its downfall.
After announcing its shut down, the founder of Quibi, Jefferey Katzenberg, initially attributed the failure of the company to the coronavirus. However, in later statements, he acknowledged that it was not entirely fair to place all the blame on the pandemic and that there were other factors involved in the company's failure.
Slow to Adapt
Quibi was a newly formed company, but its founders came from large enterprises and they lacked the agile mindset of a startup. This was evident in their inability to adapt to the changes brought on by the pandemic, such as the shift in consumer behavior from mobile to larger screens. Eventually, it updated the app to allow subscribers to use AirPlay and Chromecast to watch content on their televisions, and a day before shutting down, the company launched apps for Apple TV, Android TV and Fire TV. But it was too late!
I’m pretty sure, they also knew that consumers were preferring long form content over short-form content at home, however, I didn’t see any change in their content strategy.
This lack of an ability to evolve quickly was the main reason why Quibi struggled to find a product-market fit and ultimately failed as a company.
No Differentiation: Content or Technology
Quibi focused on short-form premium media content. There are plenty of players in both short-form media and premium media segments. The company could not create an edge in highly crowded markets.
Quibi faced a major disadvantage in the premium content segment as compared to subscription services like Netflix, Disney+, HBO Max, and NBCUniversal's Peacock, which already had a deep catalog of popular content that had established a loyal viewer base. Instead, Quibi planned to rely solely on original content featuring A-list stars as actors and producers. However, this strategy required at least one huge hit to entice subscribers, and while Quibi had some engaging shows from the likes of Kevin Hart, Jennifer Lopez, and Steven Spielberg, they were not popular enough to drive subscriber growth numbers.
The company experienced the same problem in the short-form media content segment that has already been done by many players including YouTube for 10 years, with shorter form platforms like TikTok and Instagram having existed in one form or another for several years as well. Quibi failed to compete in this segment against the free content providers because of lack of differentiation.
On the technology front, Quibi tried to create differentiation with its technology’s ability to switch between horizontal and vertical viewing, however, it did not prove attractive enough to incentivize enough people to subscribe. Additionally, the technology was quickly challenged in court over allegations of patent infringement, which Quibi denied.
Lacked value for $8/mo subscription fee
Quibi faced significant challenges from the beginning, with its pricing plan being a major contributor to its failure to attract subscribers. Users saw little value in paying $5 a month (or $8 a month without ads) for content that was inferior to what was offered for free on platforms like TikTok, YouTube, and Twitch. Additionally, the shows and films on Netflix, Amazon, and Disney Plus were much more popular and well-regarded. This highlights the core problem with Quibi: the poor quality of its content.
In a desperate attempt to turn things around, Quibi introduced an ad-supported free version in Australia and New Zealand, but by that point it was too late to save the struggling business.
When a product does not meet the needs of the market, high pricing will only push the startup to the graveyard.
Failure of the Entire Thesis
While the COVID changed the market dramatically, we cannot entirely blame COVID for the failure of the thesis that consumers want on-the-go short-form premium media content.
The founders failed to understand what consumers want and how they use their phones. The Quibi founders believed that people wanted this type of content every single day, but in reality, people had been getting similar content for free for years on platforms like YouTube, TikTok and Facebook.
It felt like the company was solving a non-existing problem. I am still struggling to understand why users need Quibi? Why do I download this app and pay $5 every month? The thesis was fundamentally flawed.
Founder Dispute
Quibi's leadership was plagued by internal conflicts, with CEO Meg Whitman reportedly threatening to quit due to issues with co-founder Jeffery Katzenberg's management style. According to The Wall Street Journal, Whitman felt that Katzenberg was dictatorial, undermined her authority, and belittled her. This infighting likely contributed to Quibi's downfall, as it appears that neither Katzenberg nor Whitman truly understood the needs and desires of consumers when it came to streaming services. They were unable to grasp how people use their phones, what they want from streaming services, or why platforms like TikTok and Netflix had found success. This lack of understanding ultimately led to Quibi's failure to find a product-market fit.
Founder Accomplishments Worth Noting
Although I hold the founders of Quibi accountable for the company's failure, there are three things they did exceptionally well:
Great at Fundraising
Quibi founders had an audacious vision of building a new generation of Netflix around a short-form content platform and to do that, you need hell of money. They succeeded in raising a staggering $1.75 billion in funding to bring their idea to fruition.
Built a great community
I always believed a company is nothing but a community of customers, employees, partners, investors, advisors and evangelists. Smart and passionate people you have in your community, higher chances of success of your company. Quibi founders did an amazing job bringing so many smart folks into their community including their media partners, investors, filmmakers and actors.
No dragging it long but shutting down quickly
Shutting down a company is a painful event for any founder but making this decision takes a huge amount of courage. The Quibi founders demonstrated courage by taking this step as soon as they realized that their vision was not feasible. They did not drag things out, but rather, made a swift and decisive decision.
Staff data scientist, MAFer, Georgia Tech Alumni
1y500k consumers generating 3M is a good one. So i dont think the content was bad....Perhaps it was the pandemic....
Owner Code Ninjas West Springs | Owner Code Ninjas Chestermere | STEM education | Technology Enthusiast | Computer Coding
1yLove both your articles in the newsletter!