By Jon Swartz
Quibi Inc. is quitting.
Late Wednesday, founder Jeffrey Katzenberg and Chief Executive Meg Whitman decided to shut down the short-form video-streaming company “on or about Dec. 1” in an effort to return as much capital to investors as possible after discussing the company’s options with investors, the company announced.
“The world has changed dramatically since Quibi launched and our standalone business model is no longer viable,” Katzenberg said in a statement.
“While we have enough capital to continue operating for a significant period of time, we made the difficult decision to wind down the business, return cash to our shareholders, and say goodbye to our talented colleagues with grace,” Whitman said in a statement. “We continue to believe that there is an attractive market for premium, short-form content. Over the coming months we will be working hard to find buyers for these valuable assets who can leverage them to their full potential.”
Shutdown after less than a year was the most extreme option for the Los Angeles startup as it navigated lower-than-expected viewership and downloads, a patent lawsuit from interactive-video company Eko bankrolled by hedge fund Elliott Management Corp. , and a pandemic that has upended its business proposition.
Employees will be laid off and Quibi will explore selling the rights to some of its content to other media and technology firms, according to the Wall Street Journal, citing people familiar with the matter.
Time appeared to be running out on Quibi. In recent weeks, the company hired a restructuring firm to evaluate its options, according to news reports in the Wall Street Journal and news site The Information. The firm recommended a shutdown, among other moves, to Quibi’s board of directors this week.
Quibi founder Katzenberg had envisioned the company as an “HBO for mobile users,” he told MarketWatch earlier this year. But the former chief executive of Walt Disney Co. (NYS:DIS) has tried to sell Quibi’s catalog of programming to Comcast Corp.’s (NAS:CMCSA) NBCUniversal and Facebook Inc. (NAS:FB) . Both declined, according to The Information.
Read more: ‘Honestly, we don’t know what to expect’: Meg Whitman’s big-money streaming startup Quibi launches in a new world
The video-streaming platform for 5- to 10-minute clips on mobile devices bet $1.75 billion on the notion it could transform entertainment with Hollywood-quality “quick bites” content to watch “on the go” — even as much of the world was trapped at home because of COVID-19.
Before the pandemic gripped the U.S. in March, Quibi was able to attract a corral of A-list advertisers that included Walmart Inc. (NYS:WMT) and PepsiCo Inc. (NAS:PEP) . Venture capitalists and marque studios including Disney, 21st Century Fox, and Sony Pictures lined up, pouring hundreds of millions of dollars into the startup before it launched in April. Former Hewlett Packard Enterprise Co. (NYS:HPE) and eBay Inc. (NAS:EBAY) CEO Whitman was tapped to run the show.
Big-name movie and TV talent signed up to produce films and series, including Oscar winners Steven Spielberg, Guillermo del Toro and Reese Witherspoon. Quibi was paying $100,000 a minute for feature films — a rate comparable to big productions by Netflix Inc. (NAS:NFLX) , Amazon.com Inc. (NAS:AMZN) , AT&T Inc.’s (NYS:T) HBO Max or Walt Disney Co.’s (NYS:DIS) Disney+. When it debuted in April, the service boasted 50 programs.
Read more: CES 2020: Quibi is about to see if its $1.4 billion streaming bet will pay off
But viewers proved elusive during the pandemic, prompting Quibi to increase its trial offer from two weeks to 90 days to attract more customers. As of the third quarter, Quibi had 710,000 home subscribers — a fraction of competing video-streaming services — and a third of its subscribers said they planned to cancel in the next three months, according to Andrew Skerratt, an analyst at market researcher Kantar.
“Katzenberg’s excuse that they failed because they launched during a pandemic is bogus,” Eric Schiffer, CEO of private equity firm The Patriarch Organization, told MarketWatch. “The content was weak and didn’t stack up against a free to use TikTok nor the quality of huge players like Netflix and Disney+. Quibi’s choice to ask for users credit card for a trial was the single worst marketing move of 2020 and pure arrogance that blew up in their face. “
Added Forrester analyst Jim Nail: “The pandemic gives them a good excuse for their failure, but I think the real problem was that the idea of episodic content in five-minute 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. When they want highly involving, high-production content, they want it on their TV screen in 30 minutes or longer chunks where they can lose themselves in the story and escape from the craziness that is 2020.”