"I'm not at all surprised," says Hal Vogel, CEO of Vogel Capital Research and a former entertainment analyst. "I never understood the concept's appeal" or saw its "ability to scale," given the basic idea was to "charge sub fees while spending enormous amounts per minute of programming." As a result, "from the start, this was a solution looking for a problem." He adds: "I also thought the competition for short time frames was more amenable to things like crossword puzzles or Candy Crush-type video games."
Peter Csathy, founder and chairman of advisory firm CreaTV Media, says he was also "always skeptical about Quibi’s chance" and felt it "always had a huge uphill fight." But, he adds, that "I like bold, audacious experiments – and Quibi was certainly that."
He expects the Quibi model, which included a $5 a month ad-supported tier, to be something that the industry will check off for good after the company's failure to gain traction in an increasingly crowded marketplace of streaming giants like Netflix, Hulu, Amazon and Disney+ and new entrants like AT&T's HBO Max and Comcast's Peacock.
"If Katzenberg couldn’t pull off Quibi’s core vision, then no one can – and that vision of expensively produced, Hollywood-budgeted content for a mobile-first millennial audience is confined to the entertainment dustbin in perpetuity," Csathy argues.
One media investor says the fate of Quibi, which touted more than 100 original shows, reminded him of Verizon’s Go90 streaming service, which was launched in 2015. The telecom giant spent hundreds of millions on to build its advertising-support service and buy up programming, but consumers didn't seem to care much. Only a few shows broke out, such as competition series The Runner from executive producers Matt Damon and Ben Affleck. That led to its shutdown after three years.
Observers will likely discuss what went wrong for Quibi for a while. Csathy suggests though that the company faced content, distribution and marketing challenges. The company "got its marketing wrong, its target market," Csathy argues. "Young people had no idea what it was, or why they should care. Their initial 'coming out' Super Bowl ad was a disaster." (The Super Bowl commercial featured bank robbers escaping while the getaway driver watched content on a phone, replying, "I'll be there in a Quibi.")
Quibi also "got its content wrong," Csathy adds. "Its target market – young people – didn’t care that traditional Hollywood superstar talent like Steven Spielberg was behind the camera."
And the service may have misjudged its distribution strategy. "Quibi’s content was not social," he says. "It was incredibly difficult to share and, hence, scale and succeed." Plus, "for all the talk of Meg Whitman’s tech team revolutionizing the mobile playback experience, that team forgot to make Quibi’s content playable on television screens via your entertainment hubs in the living room," Csathy notes.
All that meant that Quibi's business model didn't add up as its target market was competing with free advertising-supported content offerings.
But Csathy does think that the pandemic also played into the equation. "Its target audience was always daytime audiences – students and young working people – to give them premium 'quick bites' throughout their day while they ordered their cappuccino etc.," he explains. "Instead, with the COVID lockdown, that audience vanished in large numbers. And, Quibi never had a nighttime living room strategy."
Observers have taken the fact that Quibi decided to shut down as a signal that not even its management team sees a real chance of making the business work.
Katzenberg and Whitman in a letter suggested as much when they brought up two possible reasons for not really getting Quibi off the ground: "Because the idea itself wasn't strong enough to justify a stand-alone streaming service or because of our timing." Their conclusion: "We will never know, but we suspect it’s been a combination of the two."
Enders Analysis' Tom Harrington says that the company tried to reinvent the wheel. "The weird strategies around not initially being available on TVs etc. have been well covered," he says. "But for me the core problem was always that there is no clear evidence that people, who have been trained by 50+ years of episode lengths on TV, actually want narratives in shorter form. It's certainly not what they watch on YouTube. And if there is some desire for that, Quibi was still going to have to spend hundreds of millions on content that it had no idea would work, and would probably be useless when it finally worked out what did."
He adds: "It's no surprise that despite all its innovation around delivery, Netflix presents very traditional formats. The fact that a lot of legacy companies invested in Quibi was more a sign of desperation on their part than any sort of belief in what it was trying to do."
In a report earlier in the year, Harrington and colleagues had warned: "For an unproven service to attract 1.3 million active users in its first five weeks is impressive. But by its own account, Quibi’s launch underwhelmed. Sizeable subscriber targets — 7 million by year one and 16 million by year three — justify a level of spend never seen in short-form video, but are ambitious for an experimental start-up with limited brand equity." (Quibi had disclosed that it had 1.6 million subscribers to its initial 90-day free trial.)
CFRA Research analyst Tuna Amobi calls Quibi "by far the most notable start-up that is being shut down," saying it was "a high-profile victim of its own inauspicious timing, which was hardly surprising."
But he doesn't expect it to be the last casualty of the streaming age. "It’s quite conceivable there could be other potential start-up failures that are currently flying below the radar," he says.
Harrington echoes that, saying: "It is the first of what will be a number of streaming services that will not be able to sustain themselves."
Research and accounting firm PricewaterhouseCoopers in its "Global Entertainment & Media Outlook 2020–2024" report earlier this year also warned that "subscription fatigue" and "peak wallet" will become "increasingly commonly used phrases as the overcrowded market for [streaming] services forces consumers to decide which, and how many, they want to take." Based on the theory that consumers are willing to pay for three to five pay TV and/or streaming services, it predicted that "there will be a number of high-profile streaming casualties by the end of the forecast period."
It could be that the barrier to entry in the streaming industry is getting higher following the rush of new entrants in the space. "Not every startup is the next Netflix," says Wedbush analyst Daniel Ives. "Quibi shows streaming content is fiercely competitive with consumers starting to get saturated with many services abound in this COVID backdrop."
Amobi also argues that Hollywood giants must heed the lessons and warnings the Quibi story provides at a time the pandemic is causing major challenges for them. "Some of the major Hollywood studios have not been immune," Amobi says. "Although such impact may seem relatively muted, [it is] nonetheless likely to result in pandemic-related content write-offs that are well above normalized levels."
This article was originally published by The Hollywood Reporter.