Quibi To Shut Down, Ending $2B Streaming Experiment

Quibi, the mobile streaming service launched amid great fanfare and nearly $2 billion in start-up capital by Jeffrey Katzenberg and Meg Whitman, is officially shutting down.

Deadline has learned that Katzenberg and CEO Whitman are about to have a call with investors this afternoon to explain their decision to wind down the short-form video service after little more than six months. They are exploring options including selling content or the entire service in the hopes that a buyer emerges.

The process of bringing Quibi to a close is expect to take several months we hear with subscribers receiving notifications in the near future. A staff meeting with Katzenberg and Whitman is also scheduled for later today

The service launched in April, funded with investments from a range of major media companies and blue-chip investors, just as COVID-19 was starting to upend the world. Its meltdown has set tongues wagging in the ultra-competitive Hollywood and tech trenches, as Quibi ranks among the priciest misfires of any entertainment-related startup.

Its failure will put about 200 employees out of work, punctuating an already grueling time for the entertainment sector. Questions will swirl around the fate of its roster of “quick bite” programming from A-list creators like Stephen Spielberg, Guillermo del Toro and Antoine Fuqua and also which investors will take the steepest losses. While a host of household names got involved in shows like Dummy with Anna Kendrick or a remake of The Fugitive with Kiefer Sutherland, plus custom teamings with ESPN and 60 Minutes, no show truly entered the zeitgeist. A creative high point may have been last month’s Creative Arts Emmys, where #FreeRayshawn won two prizes.

The startup spent lavishly on promotion, buying multiple TV ad slots on the Super Bowl and the Oscars last February on the heels of a splashy presentation in Las Vegas at CES. After a pullback in the spring, the company revved up the marketing engines again over the summer, buying more TV and digital spots, with more of a focus on individual shows than on introducing customers to the platform. According to ad tracking firm iSpot, the company spent $63.7 million on TV in 2020.

The return on that investment never fully materialized, however. In its first 90 days, during a free trial period, the streaming app was downloaded 5.6 million times, the company said last month. Only a small percentage of those downloads converted to subscribers paying $5 a month or $8 for an ad-free version. (One third-party estimate put the conversion rate at just 8%, but Quibi vigorously disputed that number.)

Executive turnover also dogged the company. Marketing chief Megan Imbres, a Netflix veteran, left two weeks after the April launch. Some skeptics of the company’s strategy questioned the decision not to provide a smart-TV app, leaving mobile as the only way to view Quibi, as opposed to YouTube, which has experienced strong growth in the home. It accelerated plans to develop a living room app in the spring, and just this week confirmed distribution deals with Apple TV and Google.

Among other unresolved issues, Quibi is still partially embroiled in crossfire legal action with Eko, the Elliot Management-backed interactive video company, over potential patent infringement over its Turnstyle interface. Kicked off by initial filings by Quibi in late March, the case is understood not to have played a role in the company’s decision to pull the plug.

While Quibi pushed back repeatedly on reports of turmoil and layoffs, the company never disputed the reality that its performance out of the game fell below expectations. At an online keynote appearance in June at SeriesFest, Katzenberg conceded things had not gone according to plan. Still, he characterized the soft initial numbers as “almost a beta” launch phase, allowing the startup to regroup. “I’m quite optimistic that this use case is going to work,” the founder said. “People are loving this.”

The effects of COVID-19 will always be debated when it comes to sizing up Quibi’s short run. But viewing at home on mobile devices did not diminish during shelter-in-place, according to researcher Bruce Leichtman, as has been borne out in recent numbers from TikTok, Snapchat and YouTube.

“Quibi was based on a sound premise,” Leichtman said. But its “challenge in building an active subscriber base goes well beyond the fact that it was designed specifically for mobile phone viewing at a time when people were spending much more time at home. It is also a reminder that regardless of experienced leadership and strong financial backing, no streaming video business model is a gimme; particularly one that includes consumer paying to subscribe where there is a plethora of free alternatives.”

Ed Laczynski, CEO of Zype, a digital video infrastructure company that works with content producers and aggregators, predicts “there will be a lot of business school studies of this.” He said an experimental, curious, learning-based approach is key. “Experimenting more, early on, with technology, getting more feedback from the market.” He added, “Just because Netflix makes it looks easy doesn’t mean it is easy.”

While apps for the living room finally came into the picture, the pivot was too late and connected-TV platforms could have offered a meaningful extension of Quibi as it found its footing. Platforms like Apple and Roku “have an appetite for premium content that is searchable and real,” Kaczynski said. They could also have approached free ad-supported streaming outlets like Xumo, Pluto, or even NBCU’s Peacock. These platforms can leverage large audiences relatively cheaply. It could have been teased early to see how things performed.”

Another executive in the space said the simple problem was hits. “No one seemed to find a show they fell in love with. They needed at least two big hits to generate at least enough of an audience. They needed anchor tenants. And I wish for their sake they would have gotten them.”

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