Doomed Quibi gave titans lesson on quick bytes

Quibi Holdings LLC faced many challenges during its short life: a global pandemic, Netflix Inc.’s dominance in streaming, and a fickle consumer with lots of other viewing options.

But ultimately, the very premise of the startup — that smartphone users wanted to see highly polished shows chopped up into short bits — may have been its undoing. Though the company blamed COVID-19 for hastening its demise, Quibi’s short-form approach to video never caught on with viewers. And that didn’t seem likely to change once the pandemic ends.

“The pandemic gives them a good excuse for their failure, but I think the real problem was that the idea of episodic content in fiveminute chunks isn’t what people are looking for on their smartphone: They want the six- second goofy dance move on Tiktok or an influencer video on Youtube or Instagram,” said Jim Nail, an analyst at Forrester Research Inc.

Quibi, which took its name from “quick bites,” set out to give people short clips with big stars and high production values — a typical episode might cost US$ 100,000 a minute to produce. But that didn’t scratch an itch for consumers, Nail said. It didn’t help that the Quibi app couldn’t even be viewed on TVS when it first launched in April, making it less appealing to couch potatoes.

“When they want highly involving, high- production content, they want it on their TV screen in 30- minute or longer chunks where they can lose themselves in the story and escape from the craziness that is 2020,” Nail said.

The lesson embedded in Quibi’s brief but flashy existence will likely be held up for years as an example of how hard it is to adapt old Hollywood thinking to the new world of entertainment. Jeffrey Katzenberg, a movie mogul who once chaired Walt Disney Studios and co- founded Dreamworks, wasn’t a man people considered wise to bet against. And a number of industry heavyweights, including Disney and Warnermedia, opened their chequebooks to wager on Quibi’s success, plunking down a total of US$ 1.8 billion over the past two years.

Investors didn’t necessarily expect Quibi to be a huge hit, but they didn’t want to look stupid if it somehow took off.

There was initial hope the pandemic may help the company. As the lockdown began, competing entertainment services, including Disney+ and Netflix, became more popular than ever. Bytedance Ltd.’s Tiktok app, which lets users post their own short videos, could barely keep up with staffing needs as its use exploded among homebound teens.

When Quibi launched in April, the company suggested it could ride that same wave of success. Katzenberg predicted eight to 10 of its 175 first- year shows would go viral, drawing millions of people to the platform.

But none of Quibi’s shows caught fire. One handicap was the fact that users couldn’t initially screenshot programs to send them to their friends or make memes. Users who did like Quibi’s lineup quickly ran out of shows. The company planned fewer than 200 programs in its first year, compared with the thousands available on other similarly priced streaming services.

The company’s CEO, former ebay Inc. head Meg Whitman, said it would need about 12 million paying users “over time” to break even, but fewer than half a million people stuck around to pay for the app after a free trial expired. Even if the company had reached a one- time “worst- case” scenario of attracting 1.6 million subscribers in the first year, its expensive content would have depleted its cash reserves by next year.

“Each service needs compelling content to bring in new subscribers, and once they’re subscribing, lots of content to retain them,” said Naveen Sarma, a senior director at S&P Global Ratings. “Failing that, it needs a deeppocketed parent who is willing to fund losses until the service creates enough content to attract enough customers. Quibi seems to have failed in all aspects.”

All told, Quibi may have about US$350 million to distribute back to shareholders, after covering its liabilities and winding down its operations. It also plans to sell its remaining assets, though that may be tricky. Quibi’s content eventually reverts back to the creators, and the technology underlying the app is the subject of an expensive lawsuit. Previous attempts to sell the company to competitors, such as Apple Inc., were unsuccessful.

In reflecting on the company’s failure, Katzenberg and Whitman acknowledged that the pandemic alone probably wasn’t the culprit. Beyond poor timing, the idea behind Quibi may not have been strong enough “to justify a stand- alone streaming service,” they wrote in an open letter Wednesday.

But the company still believes there’s a market for premium short- form content, Whitman said in a separate statement — a premise that will be tested as Quibi tries to unload its assets.

“Over the coming months we will be working hard to find buyers for these valuable assets who can leverage them to their full potential,” she said.

SHORT-FORM APPROACH NEVER CAUGHT ON WITH VIEWERS.