Quick bites. Big stories. That’s how short-form video platform Quibi describes its subscription-based premium streaming video app. Six months after launch, Quibi is looking for a buyer, says Recode/Vox. They also report that the company’s CEO Meg Whitman and founder Jeffrey Katzenberg have pitched a potential purchaser already, though they declined to provide details. Other options for the company including raising capital in addition to the $1.75 billion the company has already raised, or possibly being acquired by a special purpose acquisition company (SPAC), according to Deadline.
“Quibi has successfully launched a new business and pioneered a new form of storytelling and state-of-the-art platform. Meg and Jeffrey are committed to continuing to build the business in the way that gives the greatest experience for customers, greatest value for shareholders and greatest opportunity for employees,” a Quibi spokesperson told Deadline.
The big question is what happened to the mobile-only video platform which includes bite-sized 10-minuted programs and chapters from celebrities like Chrissy Teigen and Joe Jonas, cooking shows, comedy, docu-series and more. After a 14-day free trial, Quibi offers an ad-supported streaming plan for $4.99 a month or $7.99 a month without ads. For those with a short attention span, this platform could be ideal, but it hasn’t panned out that way.
Katzenberg and Whitman said that the pandemic contributed to the company’s lackluster launch. In its first two months, Quibi had 4.5 million downloads and 1.6 million subscribers. Initially, Quibi estimated that it would attract more than 7 million paying subscribers in its first year, reports Tubefilter. However, according to the Wall Street Journal, 2 million subscribers is a more realistic estimate.
At $4.99 a month, 1.6 million subscribers would generate $95.8 million annually. At that rate, it would take the company over 18 years to pay back the $1.75 billion investment, not including interest or subtracting out expenses. The company does have ad revenue, however, but it is likely that that has dwindled as part of the overall decline of ad spend throughout the pandemic.
Possible patent infringement
Becoming financially viable isn’t Quibi’s only challenge, however. According to Tubefilter, Quibi is being sued by Eko for allegedly stealing proprietary technology. The companies are fighting over Quibi’s Turnstyle technology which automatically optimizes a video for the orientation of a user’s smartphone. For example, if I am watching “Chrissy’s Court” vertically, Quibi will automatically optimize the video for that format. Quibi is, in turn, suing Eko, saying they want Eko to confirm that their technology is not patent infringement.
It seems to be a classic “he said, she said” argument, where Eko claims that Quibi stole trade secrets during meetings with them, while Quibi says that their own engineers developed the technology. The courts will have to make that determination if the companies can’t come to an agreement. The potential liability of a settlement or a guilty verdict could hurt Quibi’s chances of being acquired.
There are a couple of key issues here. Though Quibi got a lot of hype prior to launch, the heightened risk and awareness of COVID-19 stole their thunder a bit. They also have the legal battles to contend with which may have scared off additional investors. The content seems solid, and the subscription plans are reasonably priced, so it is hard to imagine why there is so little interest.
Perhaps the excitement over TikTok and other competitors were more appealing. Quibi could also have gotten lost in the launch of other streaming services, including HBO Max and Peacock which also launched in the second quarter of 2020 and streaming services like Disney+ and Apple TV+ which launched late last year. Though Quibi’s platform is unique, it is competing for attention, and that is tough to beat with so many options available.