Smith Brain Trust / September 30, 2020

What Went Wrong for Quibi?

And is it too late to right the ship on this short-form video startup?

What Went Wrong for Quibi?

SMITH BRAIN TRUST  It seemed like Quibi had it made. Founded by Hollywood mogul Jeffrey Katzenberg, and helmed by former Hewlett Packard CEO Meg Whitman, the short-form mobile-friendly video streaming service was well funded and had a lineup of A-list stars and producers. What could go wrong?

Plenty, it seems like.

The streaming service has lagged in new subscribers since its pandemic-lockdown-era launch in April, and now the service is said to be exploring its strategic options, including a possible sale.

Michel Wedel, Distinguished University Professor and PepsiCo Chair in Consumer Science at the University of Maryland’s Robert H. Smith School of Business, has been following Quibi’s entry into the crowded field of subscription streaming services. He says the reason why Quibi didn’t catch on with consumers is simple. “Consumer demand was not there,” he says. ”Why consumers were not responding is more difficult to answer.”

“Quibi had a powerful concept,” Wedel says. “With decreasing consumer attention spans, especially online and on mobile devices, short snippets of content offer a very attractive proposition – especially if that content is of high quality, as some of Quibi’s content is.”

The cadre of entertainment stars with content deals with the platform seemed poised to drive viewership, he adds. “And, with the ever larger number of consumers that watch video content on their mobile devices, it was reasonable to expect demand for short snippets of high-quality content to soar.”

The subscription model

Quibi launched with a two-tier subscription model, in which consumers would pay a monthly rate to stream content without commercials, or a lower rate to stream with commercials.

“While the pricing itself is quite reasonable, launching two versions at the same time, especially when they are both paid downloads, is unlikely to be an effective strategy because it comes at a significant cost while at the same time the two paid versions cannibalize each other,” Wedel says.

“Unlike a fully free version, neither of these two versions has the ability to quickly build up a large user base that will generate advertising revenue in the long run.”

What you get

Quibi offers neat turnstyle technology that lets viewers watch content from different perspectives by rotating their phones. It’s “a nice feature,” says Wedel, but probably not nice enough to drive consumer acquisition or retention on its own.

Compounding Quibi’s troubles was the fact that users initially weren’t able to share content on social media, and the platform lacked technologies for building interactive streaming communities.

Katzenberg has blamed much of the company’s woes on timing, launching as it did in the early weeks of the pandemic’s lockdown orders. Quibi, with its short-form videos, was created as ideal on-the-go entertainment – a perfect preoccupation in waiting rooms, public transit, while waiting in a restaurant for a friend to arrive. No one was doing much of that in April.

“Nonetheless,” Wedel adds, “Quibi has a powerful concept with potential, and several of the startup problems that it has had can be fixed, hopefully in time to recuperate the large costs of development and marketing.”



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