It started as such a viable business model in a world where users could envision grabbing entertainment on the go through their phones. Now, the creator and CEO of Quibi announced that the mobile-based streaming service will be shutting down operations six months after its launch and funding will be returned to investors.
Jeffrey Katzenberg and Meg Whitman admitted that the pandemic has cost the short-form content hub unforeseen issues that has prevented the app from meeting expectations.
“The world has changed dramatically since Quibi launched and our standalone business model is no longer viable,” Katzenberg said in a statement. “I am deeply grateful to our employees, investors, talent, studio partners and advertisers for their partnership in bringing Quibi to million of mobile devices.”
Quibi had a great kick-off, being able to acquire A-list talent and raise $1.75 billion in two funding rounds from major investors, such as NBCUniversal, Disney, JPMorgan Chase & Co. and Goldman Sachs. Yet, over the summer there was an alarming slowdown in paid subscriptions and engagement.
Leadership of Quibi originally blamed the failure of the app on COVID-19. Meanwhile, other apps, such as Tik Tok, were seeing success in the pandemic.
Katzenberg and Whitman released an open letter saying, “Quibi is not succeeding. Likely for one of the two reasons: Because the idea itself wasn’t strong enough to justify a standalone streaming service or because of our timing. Unfortunately, we will never know but we suspect it’s been a combination of the two. The circumstances of launching during a pandemic is something we could have never imagined but other businesses have faced these unprecedented challenges and have found their way through it. We were not able to do so.”
The developments of Quibi will be a strong business school case study for years to come. There are many aspects that can be analyzed, such as the subscription model, marketing choices, app content and most of all, timing.
It wasn’t that Quibi wasn’t a good idea, but more so that the leadership needed to “read the room” and realize the fatigue the nation is experiencing with the rapidly unfolding events that affect the social climate.
There are so many apps and social media platforms vying for the consumers attention that to pay money for each and every one of them and make time to watch all of these original content series has essentially become overwhelming. What ends up happening is that most people mindlessly go to free platforms where entertainment is a simple glimpse and scroll.
Another issue, unlike the Netflix and Amazon Prime streaming services, there was no hype surrounding any specific program or show on Quibi. Much of its content relied on the influence of celebrity, but again, reading the room, average people are exhausted with the thought that they are easily persuaded by celebrities just because. The new celebrity is the one that people make, not the one that major corporations back.
“Quibi was a big idea and there was no one who wanted to make a success of it more than we did,” the open letter continues. “Our failure was not for lack of trying; we’ve considered and exhausted every option available to us. While the result was not what any of us wanted, we did accomplish a number of things and we are very proud of what the talented Quibi team has built with the blood, sweat, and tears that they poured into the business over these past two years.”
One major lesson that aspiring entrepreneurs, chief executives and investors can take away from Quibi’s launch and shutdown is the aggressive lesson of escalation of commitment. Katzenberg and Whitman seem to be well aware of this theory, only giving the company two years before realizing that it is time to pull the plug.
Escalating commitment occurs when a person refuses to let something go even after it has proven to be a loss. The best leaders know that quitting is not necessarily a life-ending failure. Sometimes, quitting sooner and moving on to something different can be the best thing you can do. The quicker you fail, the quicker you can get to the pot of gold.
