Media & Entertainment

What went wrong with Quibi?


Image Credits: Daniel Boczarski (opens in a new window) / Getty Images

Two months after Quibi’s high-profile launch as a short-form mobile-native TV app led by Jeffrey Katzenberg and Meg Whitman, it is evident the startup is greatly underperforming relative to the hundreds of millions of dollars already spent on content and marketing. 

According to a Wall Street Journal report, “daily downloads peaked at 379,000 on its April 6 launch day but didn’t exceed 20,000 on any day in the first week of June, according to Sensor Tower.” The article says Quibi is on pace for just 2 million subscribers by year-end, from its predicted 7.2 million. Most of the current subscriber base is on free trials, so even just maintaining the current pace of subscriber growth for several more months will be challenging. Quibi hasn’t released any of its own stats on subscribers, which it almost certainly would do to combat the negative perception among investors and press, if the stats showed a lot of traction.

I argued in 2018 that Facebook should turn its IGTV into a Quibi competitor, and I continue to believe there’s untapped opportunity for premium, mobile-native storytelling apps. So what went wrong with Quibi? There appear to have been four key mistakes:

  1. Miscalculating the risk of launching during the COVID-19 lockdown.
  2. Failing to see the central role of interactivity in mobile-native entertainment.
  3. Creating misaligned financial incentives with the wrong content partners.
  4. Launching Quibi like a movie instead of like a startup.

Quibi set out with a compelling thesis, but it repeatedly failed to act with conviction in that thesis. The company’s scramble to launch a smart TV app so consumers could use Quibi like yet another SVOD (subscription video on-demand) service shows it is strategically adrift, lacking conviction in its ability to pioneer a new, mobile-native content format and grasping for a solution in the familiar territory of an established market. 

COVID-19 miscalculation

Quibi had really bad luck. Of all the scenarios the Quibi team could have planned for, you can’t blame them for not anticipating a  pandemic hitting right as it launched an app that’s entirely based on the premise that people need better on-the-go entertainment for when they aren’t at home. A natural disaster or a war may have been less damaging than most of the population locking themselves at home for months on end.

Quibi nonetheless launched as planned on April 6. That was a miscalculation. COVID-19 became world news in January, hit the U.S. in early March and brought major U.S. cities into lockdown by March 15. Quibi had multiple weeks to understand the scope of the crisis and adjust its course.

Its constraint was the millions of dollars, potentially well over $100 million, in advertising it had already bought without an ability to cancel. By doing a massive, Hollywood blockbuster-style launch into a market that — by their own publicly shared thesis — didn’t have much demand for the product, they guaranteed negative consumer and press feedback and disappointing performance metrics that would create a narrative of failure among press, investors and content creators.

The realistic calculation should have been that the possibility of product-market fit vanished temporarily due to the market disappearing. Quibi should have repurposed the ad spend that it couldn’t get refunded to promote preregistration for the app, delayed the launch and taken immediate steps to decrease burn dramatically (layoffs, furloughs, temporary executive pay reduction of more than 10%) with the expectation of multiple months of waiting.

It’s much easier to raise further funding on a delayed promise of a glorious future than on the back of a very disappointing launch that dashed expectations (case study: Magic Leap).

Lack of interactivity

Quibi’s content isn’t substantially differentiated enough from other SVOD content or social media influencer posts to define a new entertainment category.

Quibi overemphasized attention span (“quick bites”) as what makes a mobile content experience inherently different when the bigger differentiator is interactivity. Mobile is an interactive device, a lean-in experience in which the user is constantly tapping and swiping to navigate content from Instagram stories, Snapchat messages, tweets, mobile games, news articles, etc. That’s why the $77 billion global market for mobile games is substantially larger than of the global revenue of SVOD services, despite mobile games as a format only arising as a market in 2007: mobile games are so compelling because they are native to the way consumers use the device. The concept of bringing premium quality storytelling to a mobile-native environment should inherently be centered on a more interactive format of stories, in one way or another. 

Katzenberg and Whitman spent months on the conference circuit giving their stump speech about why “The DaVinci Code” was innovative in breaking a book into lots of short chapters and how busy, on-the-go consumers really want “quick bites” of content that can fill a few minutes here and there in their day. They said little about interactivity and thus far Quibi content has all been for passive viewing with no serious interactivity. The main selling point they made about Quibi’s user experience was the ability to switch between portrait and landscape modes while watching a video — a feature that’s technically challenging but doesn’t amount to pioneering a new format (and that they are in a high-profile lawsuit overly allegedly stealing).

Quibi should have been a big bet on mobile-first interactive stories. There are multiple generations that are used to turning to their phones for what feels like passive content consumption (like Snapchat stories) even though it’s quite interactive, using their inputs every few seconds to control their experience. The penetration of smartphones and the popularity of mobile gaming allow for interactive stories with more sophisticated interaction and a more familiar feeling than the awkwardness of traditional choose-your-own-adventure videos. 

Producing really high-quality interactive stories that people love is a big challenge on both the production and the product sides — something a growing terrain of companies like Pixelberry, Pocket Gems, Twitch, eko, unrd [disclosure: I’ve a financial stake in unrd as an advisor], Tellie TV, Whatifi and others are pioneering but still in the early days of truly defining. It’s a distinct category of content separate from the processes of linear storytelling or of gaming, which is also why large incumbents in those spaces are unlikely to find success with it.

Quibi’s thesis was that mobile-native premium TV would be an entirely new content format differentiated from traditional film/TV and from the content of social media influencers. But it turned to the “incumbents” in the traditional format (top Hollywood producers) to provide that innovation. It turned to the specific creatives who need Quibi least. If it had channeled its funding into financing projects by high-potential creatives (from film/TV and from gaming) still hungry to “make it” and willing to pour themselves into experimenting with a new format, Quibi would have had a much vaster and diverse library to discover what works best in mobile-native story formats and introduce new formats of hit shows to the world that distinctly differentiate it.

Misaligned incentive structure

So Quibi’s content doesn’t feel that differentiated, but even in terms of traditional film/TV formats it hasn’t achieved any big hits in mainstream pop culture yet despite lining up many of the most successful creatives — and most famous names — in Hollywood to create original shows. It has some enjoyable shows to be fair (my favorite thus far is the vaguely Stranger Things-feeling When the Streetlights Go On) but it needs hit shows that tens of millions of people are clamoring to see in order to be successful in its current strategy.

Incentives shape behavior, and Quibi’s generous deal terms to lure Hollywood’s top producers may have backfired. I attended the Banff World Media Festival last summer where Katzenberg explained Quibi’s deal terms to TV producers:

  • Quibi funds the production on a “cost plus 20%” basis.
  • Producers retain ownership of the content.
  • After 3 years, producers are free to repurpose the content for traditional TV or film formats.
  • After 7 years, producers are free to use the mobile-native, Quibi-formatted show on any platform.

If you are a successful Hollywood producer, you have substantial opportunity cost in spending time creating a show in a new format for a new platform that hasn’t even launched yet. Your film and TV projects can each net you many millions of dollars for years to come if they get picked up by networks/VOD services — and you have the track record and relationships to maintain a high rate of selling your shows. Those successes also give you social prestige and consideration for industry awards. 

By comparison, Quibi offered unproven hope for distribution to meaningful-sized audiences and a high likelihood of being a complete flop (as any startup has). Even if you are a firm believer in Quibi’s thesis, you lose nothing by waiting for Quibi to establish itself before spending your valuable time on crafting a story for its “quick bites” format. 

Generous terms — and pressure to play nice for one of the industry’s powerbrokers (Katzenberg) — made them willing to collaborate, but producers’ financial incentives were misaligned with Quibi. They aren’t going to turn their highest potential projects into Quibi shows; they will treat Quibi as free money to try a secondary project. The Quibi show isn’t their top priority. With the deal terms above, the producer’s best-case scenario is for Quibi to flop so they can repackage the show they own but didn’t have to pay for (and that few people saw), into a TV show they can sell again to a network/SVOD service for pure profit.

When you watch Quibi shows and turn your phone to landscape/horizontal mode, what you see looks exactly like a normal TV show. Quibi’s deal terms didn’t push producers to take risks and spend a lot of effort reenvisioning TV for a mobile-native environment; the terms encouraged them to make content they could easily repurpose for traditional TV/film formats. Quibi should have designed deals anchored in a big upside to a producer for creating a successful Quibi show … for getting Quibi its desperately needed hit content. Hollywood’s biggest producers probably wouldn’t have been willing to do that, but again that’s exactly why they weren’t the right creative partners to depend on. 

Launching Quibi like a movie

Quibi set itself up for its current crisis even before the pandemic by planning to launch in one massive splash rather than launching early with far less marketing and iterating its content and tech strategy based on user feedback before spending nine-figure budgets on content and marketing.

The latter strategy is that of most startups. That’s partly due to financial constraints most have, but also the nature of responsible resource allocation: the entrepreneur tests a myriad product design and content production questions then invests further capital behind what works best. By staking everything on one launch with a $470 million marketing campaign and $1 billion in spending on content for the first year (and months of building hype), Quibi never gave itself room to make any meaningful iteration if it turned out to have misjudged the market in any way on its first attempt. 

The case against a typical startup approach here is:

  • In order for consumers to pay for a content subscription there has to be a whole library of must-see content ready to warrant it.
  • Amassing that must-see content requires hundreds of millions of dollars in spending, especially because Quibi can’t just license existing content to fill out its library like other SVOD services have done since its format is entirely new and it wants the biggest names in Hollywood attached. 
  • That substantial content spend then requires there to be enough revenue in the first year to validate for investors that the model works.

The rebuttal to that argument is, again, Quibi’s content hasn’t been that novel of a format. If Quibi had focused on a more novel interactive format, it would have escaped direct pricing comparison to Netflix and not needed so many shows. It also could have turned to existing IP to feature within its new format: it would be a new experience for the dedicated fan base of that IP and more cost-efficiently fill out an initial library. Quibi didn’t turn to existing IP because its new format isn’t different enough from the original format. By comparison, Fiction Riot, the startup whose Ficto app is the most direct competitor to Quibi in stated thesis, augmented its original shows in its early days with licensed IP from elsewhere that it reformatted. It focused on the details of the new format as the key factor to receive feedback on and get right before pouring more money into production.  

One likely reason for the movie-style launch strategy is simple lack of patience. With co-founders who are both billionaires who have run large companies (and who are used to collaborating with the biggest names in Hollywood), a slow and steady launch strategy of gradual iteration with less famous creatives likely felt neither fast enough nor grand enough.

What comes next for Quibi

Quibi could still make a comeback as countries come out of their Covid-19 lockdowns, although it will be quite difficult since it specifically set itself up for a launch strategy that didn’t allow for substantial iteration before funding dries up.

The solution to its troubles isn’t in becoming more like a normal VOD service though: that’s a crowded market that Quibi can’t financially afford to compete in, especially since that move would put it in direct competition with the studios who are its investors and who each have their own VOD plays.

Quibi’s survival rests in pioneering a new format for what premium, mobile-native shows can be beyond normal TV shows cut into shorter episodes and able to be watched on a phone held vertically. It needs to focus on greater experimentation with all types of interactive stories and to partner with creatives committed to that.

More TechCrunch

Welcome back to TechCrunch’s Week in Review. This week had two major events from OpenAI and Google. OpenAI’s spring update event saw the reveal of its new model, GPT-4o, which…

OpenAI and Google lay out their competing AI visions

Expedia says Rathi Murthy and Sreenivas Rachamadugu, respectively its CTO and senior vice president of core services product & engineering, are no longer employed at the travel booking company. In…

Expedia says two execs dismissed after ‘violation of company policy’

When Jeffrey Wang posted to X asking if anyone wanted to go in on an order of fancy-but-affordable office nap pods, he didn’t expect the post to go viral.

With AI startups booming, nap pods and Silicon Valley hustle culture are back

OpenAI’s Superalignment team, responsible for developing ways to govern and steer “superintelligent” AI systems, was promised 20% of the company’s compute resources, according to a person from that team. But…

OpenAI created a team to control ‘superintelligent’ AI — then let it wither, source says

A new crop of early-stage startups — along with some recent VC investments — illustrates a niche emerging in the autonomous vehicle technology sector. Unlike the companies bringing robotaxis to…

VCs and the military are fueling self-driving startups that don’t need roads

When the founders of Sagetap, Sahil Khanna and Kevin Hughes, started working at early-stage enterprise software startups, they were surprised to find that the companies they worked at were trying…

Deal Dive: Sagetap looks to bring enterprise software sales into the 21st century

Keeping up with an industry as fast-moving as AI is a tall order. So until an AI can do it for you, here’s a handy roundup of recent stories in the world…

This Week in AI: OpenAI moves away from safety

After Apple loosened its App Store guidelines to permit game emulators, the retro game emulator Delta — an app 10 years in the making — hit the top of the…

Adobe comes after indie game emulator Delta for copying its logo

Meta is once again taking on its competitors by developing a feature that borrows concepts from others — in this case, BeReal and Snapchat. The company is developing a feature…

Meta’s latest experiment borrows from BeReal’s and Snapchat’s core ideas

Welcome to Startups Weekly! We’ve been drowning in AI news this week, with Google’s I/O setting the pace. And Elon Musk rages against the machine.

Startups Weekly: It’s the dawning of the age of AI — plus,  Musk is raging against the machine

IndieBio’s Bay Area incubator is about to debut its 15th cohort of biotech startups. We took special note of a few, which were making some major, bordering on ludicrous, claims…

IndieBio’s SF incubator lineup is making some wild biotech promises

YouTube TV has announced that its multiview feature for watching four streams at once is now available on Android phones and tablets. The Android launch comes two months after YouTube…

YouTube TV’s ‘multiview’ feature is now available on Android phones and tablets

Featured Article

Two Santa Cruz students uncover security bug that could let millions do their laundry for free

CSC ServiceWorks provides laundry machines to thousands of residential homes and universities, but the company ignored requests to fix a security bug.

2 days ago
Two Santa Cruz students uncover security bug that could let millions do their laundry for free

TechCrunch Disrupt 2024 is just around the corner, and the buzz is palpable. But what if we told you there’s a chance for you to not just attend, but also…

Harness the TechCrunch Effect: Host a Side Event at Disrupt 2024

Decks are all about telling a compelling story and Goodcarbon does a good job on that front. But there’s important information missing too.

Pitch Deck Teardown: Goodcarbon’s $5.5M seed deck

Slack is making it difficult for its customers if they want the company to stop using its data for model training.

Slack under attack over sneaky AI training policy

A Texas-based company that provides health insurance and benefit plans disclosed a data breach affecting almost 2.5 million people, some of whom had their Social Security number stolen. WebTPA said…

Healthcare company WebTPA discloses breach affecting 2.5 million people

Featured Article

Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Microsoft won’t be facing antitrust scrutiny in the U.K. over its recent investment into French AI startup Mistral AI.

2 days ago
Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Ember has partnered with HSBC in the U.K. so that the bank’s business customers can access Ember’s services from their online accounts.

Embedded finance is still trendy as accounting automation startup Ember partners with HSBC UK

Kudos uses AI to figure out consumer spending habits so it can then provide more personalized financial advice, like maximizing rewards and utilizing credit effectively.

Kudos lands $10M for an AI smart wallet that picks the best credit card for purchases

The EU’s warning comes after Microsoft failed to respond to a legally binding request for information that focused on its generative AI tools.

EU warns Microsoft it could be fined billions over missing GenAI risk info

The prospects for troubled banking-as-a-service startup Synapse have gone from bad to worse this week after a United States Trustee filed an emergency motion on Wednesday.  The trustee is asking…

A US Trustee wants troubled fintech Synapse to be liquidated via Chapter 7 bankruptcy, cites ‘gross mismanagement’

U.K.-based Seraphim Space is spinning up its 13th accelerator program, with nine participating companies working on a range of tech from propulsion to in-space manufacturing and space situational awareness. The…

Seraphim’s latest space accelerator welcomes nine companies

OpenAI has reached a deal with Reddit to use the social news site’s data for training AI models. In a blog post on OpenAI’s press relations site, the company said…

OpenAI inks deal to train AI on Reddit data

X users will now be able to discover posts from new Communities that are trending directly from an Explore tab within the section.

X pushes more users to Communities

For Mark Zuckerberg’s 40th birthday, his wife got him a photoshoot. Zuckerberg gives the camera a sly smile as he sits amid a carefully crafted re-creation of his childhood bedroom.…

Mark Zuckerberg’s makeover: Midlife crisis or carefully crafted rebrand?

Strava announced a slew of features, including AI to weed out leaderboard cheats, a new ‘family’ subscription plan, dark mode and more.

Strava taps AI to weed out leaderboard cheats, unveils ‘family’ plan, dark mode and more

We all fall down sometimes. Astronauts are no exception. You need to be in peak physical condition for space travel, but bulky space suits and lower gravity levels can be…

Astronauts fall over. Robotic limbs can help them back up.

Microsoft will launch its custom Cobalt 100 chips to customers as a public preview at its Build conference next week, TechCrunch has learned. In an analyst briefing ahead of Build,…

Microsoft’s custom Cobalt chips will come to Azure next week

What a wild week for transportation news! It was a smorgasbord of news that seemed to touch every sector and theme in transportation.

Tesla keeps cutting jobs and the feds probe Waymo