Quibi – Eyeball desert

Quibi looks doomed to fail.

• The early figures for Quibi are very disappointing which the company is blaming on the pandemic lockdown which I find very surprising as everyone else is finding precisely the opposite.
• I suspect that the reality is that the video format that Quibi is pushing simply does not work under any circumstances which will result in a $1bn experiment that fails.
• Quibi is a short-form mobile video platform that is backed by a series of media companies with two main features.
• First, the video works just as well in portrait or landscape format making it ideal for smartphones and tablets and second, each episode only last 10 minutes.
• These characteristics have been chosen to work best on mobile devices and Quibi plans to spend $1.1bn commissioning 8,500 10-minute episodes during its first 12 months of operation.
• Quibi is financed with a combination of a $4.99 a month subscription and advertising from a few key sponsors.
• It is from the key sponsors where the rumblings are beginning to emerge as Quibi’s performance since launch has been lacklustre and these sponsors are trying to renegotiate or defer payments that they had previously agreed to make.
• Quibi launched in April 2020 and is targeting 7m subscribers in its first year but so far it has only signed up 1.5m.
• This is a problem because Quibi is not generating the interest that it needed which is evidenced by the fact that it has sunk without trace in the app store charts after hitting 1.7m in the first week.
• The app is now ranked 922^nd in the USA App Store for downloads and 500^th for revenue generation indicating that there is very little interest in what it has to offer.
• Founder Jeffrey Katzenberg blames everything that has gone wrong on the COVID-19 pandemic but this makes no sense at all.
• His rationale is basically that the video service was designed for busy people who don’t have time to watch longer shows and that now everyone has lots of time, this format does not work.
• However, other services like TikTok and Snap have seen big uplifts in their engagement with everyone stuck at home indicating that the services with which Quibi is competing are flourishing.
• Furthermore, YouTube, where most of its videos are within the 10-minute range, has also seen a big increase in traffic further indicating that the lockdown has been great for streaming services.
• At the end of the day, the evidence from its competitors strongly suggests that if Quibi can not make it in the pandemic, then it is not going to make it at all.
• Quibi’s advertising partners are right to try and renegotiate their payments as it looks very much like the engagement that they were promised in return for their sponsorship has no hope of materialising.
• The company has responded by delaying its hiring and reducing its engagement with contractors, but I think this is not nearly enough.
• The last month’s performance indicates that the proposition that Quibi is pushing will not work in any circumstances and so the company should halt production on all of the content it is currently creating.
• This pause would give the company an opportunity to rethink its strategy and if one cannot be found, the company should close and return what money it has left to its backers.
• COVID-19 should have been the black swan that made the company succeed rather than fail meaning that when things return to a new normal, its decline will only accelerate as people have other things to do other than stream video.
• Given the founders’ attachment to this product, they are likely to come asking for more money before accepting the inevitable.
• I would not get involved in this at any price.