The death of Quibi, a six-month-old app

After a six-month run, the streaming service Quibi is shutting down. Its plans thwarted by the pandemic, its numbers in decline, and its shows lacking a loyal following, Quibi—short for Quick Bites—is closed for business. The streaming wars and the pandemic are partly to blame for Quibi's failure, as is the rise of the social media app Tik Tok. Quibi's strategy has not gained ground with the audience, mainly due to a lack of bingeable content when users have too many options. 

Jeffrey Katzenberg, co-founder of DreamWorks Animation, and former eBay CEO Meg Whitman partnered up in 2018 to create a new storytelling genre. They thought the long-form video market was saturated with content from all the existing streaming platforms—Netflix, Amazon Prime, HBO, Hulu, Disney+, Apple TV—while no one was looking at the short-form video. At the same time, they saw the numbers. We use our smartphones for everything, and the time spent on them has been steadily increasing year after year (read Mobile consumption is up… way up.) It made sense to launch a service that would capitalize on the multiple breaks that Internet users get during their working day by offering short videos that they could watch on their phones.

In April of this year, the idea came to life when Quibi was launched with considerable fanfare shortly after the COVID-19 pandemic hit the United States. Its uniqueness lay in its format—it offered 10-minute episodes of movies or shows for smartphones. Besides, Quibi's app offered certain features focused on the use of smartphones. For example, the app played different videos for viewers, depending on how they were holding their phones. But despite everything, Quibi soon struggled to get subscribers, and there were multiple reasons for it. 

Quibi's subscription fee is very similar to that of other streaming platforms, meaning it is still competing with them for the viewer’s share of wallet. For $8 a month, the user can watch unlimited videos without ads, while for $5 a month, the viewer will get the ads. In comparison, Hulu costs almost $6 with ads and nearly $12 without ads; Netflix's basic plan costs $9; HBO's $15, and Amazon Prime's $13 per month (read Quibi, the new streaming platform for mobile services). The platform was competing for the users' money, and that competition was tough. We are only willing to pay for a couple of subscription services. The fight has turned into a content fight. Many of us pay for Netflix because it offers the most content. But we want to pay for other platforms if the content is great. Hulu had shows like The Handmaid's Tale, and This is us; HBO has Succession, Big Little Lies, and The Young Pope; Amazon Prime has Fleabag and The Man in the High Castle. But what did Quibi have? Its content—based on reality TV stars or famous and well-established actors—lacked a following. And, as a consequence, subscribers did not come.

Being mobile-centered turned out to be a curse. Besides waging the content and share of wallet wars, Quibi was also competing with social media platforms for the user's attention. The time that someone would invest in Quibi is the same time one would use to scroll through Instagram or watch some Tik Tok videos. Besides, Quibi's launch coincided with Tik Tok's rise in popularity in the US (Read Tik Tok, Facebook's worst nightmare). Users fled to the platform to watch short, funny, and addictive clips. They didn't need to concentrate on a show on a new platform for which they had to pay. Tik Tok is free.

However, Quibi had other problems with its platform. On the one hand, it did not let viewers share videos or images or take screenshots, which meant that no one shared Quibi's content online, greatly diminishing the “social engagement factor”. On the other hand, when the app was launched, the user could only watch the content from their smartphone, not from the TV. In the middle of the pandemic, with quarantines in place, this was a great handicap. Viewers have grown used to using two screens simultaneously (read Second screen usage, the perfect sales opportunity), which is impossible with Quibi. A few months later, the streaming company added the option of watching the shows through other devices. Still, faults in the design led Quibi to lose momentum.

Quarantines changed users' habits. At home, they wanted to binge-watch shows for hours on end and were paying for streaming services with quality content. In an open letter to employers this week, reports The Wall Street Journal, Katzenberg and Whitman said that the company's failure could be due to two reasons. One, the pandemic; two, Quibi's concept "wasn't strong enough to justify a stand-alone streaming service."

Other problems arose, such as a lawsuit from video company Eko, arguing patent violations. Paul Singer's hedge fund Elliot Management financed the suit, which is still ongoing. 

But, despite its mistakes, Quibi was on to something. Phone usage is indeed on the rise. According to eMarketer, the average US adult spends 3 hours and 6 minutes per day on their smartphones in 2020—23 minutes more than in 2019. They also weren't wrong about the increasing interest in short-form content—take a look at Tik Tok. They might have been wrong about the delivery (the app and the lack of acknowledgment towards social media platforms), the type of content (we are used to hour-long episodes of quality shows), and the timing. And it is also questionable whether a different streaming service is needed for that—why not try it on Netflix and test the appetite?

For now, we have to say farewell to the first victim and youngest of the streaming wars. With Quibi we have learned what works and what doesn't. And we have been reminded that the user must always be at the center of a project. 

Carmen Arroyo & Josep Valor

Published in Media Matters, a blog by IESE Business School.