Streaming has been the favorite pastime of the technologically advanced audience of today. That’s because these internet-based options offer quite a lot in terms of content diversity, cost-cutting, and ease of usage. This is exactly why the trend of cord-cutting is on a steep rise, and it is estimated that streaming will take over cable TV before the end of this decade. A major reason behind the immense popularity of streaming is that most users have an internet connection in their homes today.
Thanks to providers like Cox because Cox internet plans are extremely handy in terms of speed and quite affordable on the pocket. Apart from Cox, other providers are also offering good, reliable, and cheap internet which has made it quite accessible to the general public. And since people have realized that they can get the same kind of entertainment, and in some cases, even better content over the internet, it made no sense for them to keep paying heavy cable TV bills.
When we talk about streaming there are platforms like Netflix, Amazon Prime, Disney+, and HBO Max that come to our mind. As these platforms had humble beginnings but now they enjoy a consumer base of millions and revenues in billions. But there are always two sides to the story, and today we are going to talk about the other side, the darker side.
What Was Quibi and What Happened to It?
Quibi was a streaming service that showcased a shorter form of content, somewhere between 5 to 10 minutes. Stemmed out of the sudden surge of streaming consumers during the COVID pandemic and catering to users that specifically like to watch content on their smartphones. It was launched in April 2020 but was also shut down in the same year in December, lasting merely 9 months. 910,000 people subscribed in the first two weeks and only 72,000 subscribed after the 90-day free trial. It was considered the biggest disaster in both the tech and entertainment industry, and today we are going to take a look at why all this happened to Quibi which looked like a perfect platform to build a billion-dollar startup, at least on paper.
Disconnect from Target Audience
The biggest problem this company had was that they didn’t understand the gap between short and long-form creators. Quibi’s whole idea was to create a streaming service for shows having a runtime of under 10 minutes, but with that, they also wanted to bring in big actors to do these shorts. We already had platforms for that in the shape of TikTok and YouTube with many famous content creators that not only mastered the shorter form of content but also enjoyed a healthy fan following. This was the gap in the type of content that Quibi failed to anticipate.
A Misfit Leadership
Quibi was founded by Jeffrey Katzenberg. Katzenberg was the creator of DreamWorks, producing movies such as Shrek and Kung Fu Panda, before that was a top employee at Disney, where he was in charge of animation, at a time when classics like The Aladdin and Beauty & the Beast were made.
On paper, this guy was the perfect fit to run a streaming service, but the issue was that he opted out to be the CEO. Instead, he asked Meg Whitman to be in charge. Meg Whitman was CEO of eBay, where she helped grew the company from 4 million in revenue and 30 employees and left it at 8 billion in revenue and 15,000 employees.
Meg was indeed a great CEO who knew the intricacies of running a business but unfortunately, she had no experience in media production. The biggest credit in terms of the media industry was that she was named a VP at Disney in 198. This was when she met Jeffrey Katzenberg. Although this was relevant to Quibi, it wasn’t exactly the same as being in charge of content and most of what she did at Disney was related to theme parks.
This gives rise to the question that why was she named CEO to Quibi? Simple, because if Jeffrey was made CEO, Quibi would have been a production company, but with Meg as CEO Quibi was now a tech company because of her affiliation to eBay. Making Quibi pretend as a tech company was important because of valuation.
Flawed Business Model
Comparing that to Netflix, in 2019 when Quibi was in development, Netflix had an average market cap of 141 billion dollars. Viacom being a production company was just at 26 billion and it made 27 billion in revenue for 2020, while Netflix made only 20 billion. Viacom made over 30% more money and was more profitable, but Netflix being seen in the market as a tech company was linked to the term FAANG “Facebook, Apple, Amazon, Netflix & Google”, something which soared up its value over five times than what Viacom had.
This was the biggest problem for Quibi beyond all things. Its entire business model stood at getting a high valuation with big investors, raking in some revenue, getting big names on board, and accumulating some subscribers early on to justify a mega startup close to Netflix’s valuation. All this to get a 100 billion dollar tech stock. As disjointed and skeptical this plan sounded became the reason exactly why it never happened and turned out to be a massive flop.
This is a big problem, where companies only have an app or website as a USP to their business start saying that “we’re a tech company”. To be clear, having an existing technology that anyone can use doesn’t make a company a tech company. It just made Quibi a production company with an app to flaunt. It was this fantasy dream of being a tech company that made Quibi one of the biggest flops in the history of both the tech and entertainment industry. This should be a lesson for future startups that an app or having dot com in the title doesn’t make a company a tech company anymore.
There was a long list of investors as well with companies like JP Morgan, Google, Alibaba, Disney, and Warner Bros among many other big production houses backing the project. 1.8 billion dollars was the amount of money Quibi raised out of which 63 million dollars were spent on commercials. This included several other undisclosed investors dumping somewhere around 100 million into it.
Quibi despite all of that, shut down only nine months into business and returned 20% of the money to investors which they didn’t spend. This means that they almost wasted 1.5 billion dollars on a service that couldn’t even accumulate 100,000 paid subscribers.
In a desperate attempt to salvage the mess it had created, Quibi sold 51 of its original series to Roku for an undisclosed amount, but it was reported at under 100 million, which makes it one of the biggest losses in the history of both media and tech.
It also was an extremely cheap buyout for Roku, where they got shows with industry’s big names like John Travolta, Sophie Turner, Kevin Hart, Zac Efron, Idris Elba, Jim Parsons, and many more. This is quite unfortunate because despite being all large names, nobody ever watched these shows.
This whole case study of Quibi proves how by trying to become something else we just lose ourselves in the process. The moment these big companies would learn the difference between cutting-edge technology and mere buzzwords that are designed for clients and effective marketing is the moment billion-dollar startup flops would stop happening.