Remembering Quibi

The brief rise and precipitous fall of Quibi perhaps shows that the world doesn’t need yet another big streaming service. What can we learn? Do you agree? [blog.mindrocketnow.com]

As I write this, the polished https://quibi.com/news site still presents a list of achievements: a new series, reflected glory from the Emmys. The news ends in September 2020, and omits the last piece of big story; that it has closed after 6 months and $1.75B. Most startups fail, especially those in crowded markets, but this one has failed more thoroughly than most.

In a crowded market, you have to differentiate, and that differentiation should address a gap in the market. Digital media services have been trying, to varying degrees of lack of success, to combine the way people want to consume content with the way people want to communicate - streaming and social media. So it made sense that Quibi this is the gap that should focus on; being a social streaming service. Quibi focused on short form and mobile because that’s how people live their social media lives.

Analysts were impressed with the “mission to entertain, inform and inspire with fresh content from today’s top talent—one quick bite at a time”, as were investors. And a lot of investment was needed. Quibi wanted to differentiate itself from user-generated content by having high artistic and production values. There’s not a lot of this premium content to acquire, so Quibi had to produce the content itself. And premium content is expensive to create. Netflix spent $17.3B in 2020 so if you want to be in the same game, you’ll have to spend billions too. 

The current market has shown that people will pay for content. US research shows that people are willing to pay at least $10 to $20 per month for streaming services. Backers saw an addressable market of the size of YouTube’s 2B monthly active users. It would only take a fraction of a percent of that market with a regular subscription to pay back that investment manyfold. YouTube itself has 20M subscribers for its Premium service. At Quibi’s $4.99 per month this makes a healthy revenue stream. The business case seems straightforward.

Using this huge investment, they went all in on premium content. Quibi covered the production costs, unlike cinema where producers take the financial risk and then recoup from box office receipts. This enabled content creators to take risks. The creators seemed to respond with ideas that were really interesting, using the 10min cap on duration to spur creativity. 

Was it a casualty of the pandemic? Well, Disney+ and HBO Max managed to launch and sustain, so no. The pandemic didn’t stop it getting mind share of its target audience through buying influencers. The pandemic didn’t stop it from being downloaded from app stores.

I think Quibi got the market wrong. They thought they were "competing against free". I think they were competing against the pause button. Once you get underneath the gloss and money, I think that they were solving the wrong problem. This is hardly uncommon in startups. Most startups realise this when they start to run out of money, so they pivot away or fail. Quibi had too much money so they continued. Perhaps the story would have ended differently if they had the same depth of catalogue as Disney or WarnerMedia, but they didn’t have enough money for that. Ironically, they had simultaneously too much money to succeed, and too little money to be successful.

In a crowded market, you have to differentiate, and that differentiation should address a need in the market. Quibi addressed a gap, not a need, and that is ultimately why it failed.