There’s More Than Just Covid to the Spectacular Quibi Failure

While flameouts happen all the time in the startup world, the Quibi failure is certainly unique. The company, which built a platform for short-form video streaming, lasted only six months after the launch.

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This happened even though Quibi had raised a whopping $1.75 billion in funding from investors like AT&T (NYSE:T), Comcast (NASDAQ:CMCSA), Sony (NYSE:SNE), Goldman Sachs (NYSE:GS), JPMorgan Chase (NYSE:JPM), MGM (NYSE:MGM) and ViacomCBS (NASDAQ:VIAC).

The venture also had a top-notch management team. The founder was Jeffrey Katzenberg, who was the former chainman of Disney (NYSE:DIS) Studios and the co-founder of DreamWorks Animation. As for the CEO, she was Meg Whitman, who helped to make eBay (NASDAQ:EBAY) into a powerhouse and led other companies like Hewlett Packard Enterprise (NYSE:HPE)

But such advantages were simply not enough. The fact was that Quibi did not get enough subscribers.

Note that there have been other notable failures with short-form content offerings. They include Verizon’s (NYSE:VZ) Go-90 services and AT&T’s Fullscreen.

Yet Quibi is in a league of its own, in terms of the cost and the speed of the demise.  So then what explains the failure? Why did things go so wrong?

Let’s take a look:

Covid-19 Pandemic and the Quibi Failure

Keep in mind that Katzenberg spent about two years developing Quibi. He believed that a mobile-first entertainment platform would tap into a huge market.

At the core of this would be developing high-quality content that was divided into segments of five to ten minutes. By doing this, people could get on-demand entertainment while on the go.

But the business plan did not account for something: the Covid-19 pandemic. Yes, millions of people were not on the go anymore. They were instead in their homes. Unfortunately, Quibi was only available as a mobile app — not as a service for a TV device. The result was that viewership was well below expectations.

Now Quibi did eventually make the service available for Airplay, Chromecast, Apple (NASDAQ:AAPL) TV, Amazon (NASDAQ:AMZN) Fire TV and Android TV. But unfortunately, this was way too late.

Marketing Success

The Quibi failure wasn’t for lack of premise. The service did get off to a strong start. There was considerable buzz, driven primarily by a splashy launch effort.

However, the marketing strategy would ultimately prove to be off-the-mark. The Superbowl commercial, for example, did little to explain the benefits of the service. This was the case with the other ads as well. But with any new service – especially one where a new category is being created – there needs to be constant explanations and clear-cut messaging.

There was also an underwhelming social media strategy. The main reason was that Quibi did not allow its users to make screen grabs of the content. In the end, this made it tough to have viral moments.

Too Many Alternatives

By the time of the launch of Quibi, there was a plethora of competiting streaming services on the market: Netflix (NASDAQ:NFLX), Disney+, HBO Max, Peacock, Apple TV+, Hulu, Amazon Prime, CBS All Access and on and on.

So with a lackluster marketing strategy, it became extremely difficult for Quibi to get much attention. Besides, there were no breakout hits to gin up interest in the service. Oh, and if you wanted to get decent short-form content, you could go to Alphabet’s (NASDAQ:GOOGL, NASDAQ:GOOG) YouTube or TikTok, right?

Definitely. For the most part, Quibi was unable to effectively differentiate itself in the market and provide a strong value proposition.

In fact, the company probably needed a few years to experiment and build a loyal customer base. A completely free version would probably help too. But for the most part, the $1.75 billion was not enough for this.

Yet it appears there was little appetite for investors to commit more funds. So in the end, it looks like Quibi had little choice but to shutdown the service.

On the date of publication, Tom Taulli did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.

Tom Taulli (@ttaulli) is an advisor/board member for startups and author of various books and online courses about technology, including Artificial Intelligence BasicsThe Robotic Process Automation Handbook and Learn Python Super Fast. He is also the founder of WebIPO, which was one of the first platforms for public offerings during the 1990s.


Article printed from InvestorPlace Media, https://investorplace.com/2020/10/theres-more-than-just-covid-to-the-spectacular-quibi-failure/.

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