Learn from Failure to Successfully Avoid It: Quibi’s Story

The Rising Failure of Quibi

Quibi was founded in August 2008 in Los Angeles as NewTV, a short-clip and video streaming platform basically to be viewed on smartphone devices. This American company was founded by Jeffery Katzenberg with Meg Whitman as the chief executive officer (CEO).

The year 2020 was not a good year for the world as it was completely surrounded by the disseminating novel coronavirus that brought many ongoing businesses and their owners to their knees within months, and among them was Quibi’s founder Jeffery Katzenberg.

Most of us did not even come to realize that during the ongoing pandemic, a private company was launched on April 6, 2020, but couldn’t survive to see the dawn of 2021, and was dissolved on December 1, 2020 – one of the biggest failures of the year.

The company managed to raise more than $1.75 billion to build a video streaming service platform that would stream original quality content with a monthly subscription fee of $4.99. Unlike other streaming platforms such as Netflix, Amazon Prime, Disney+, and many more, Quibi intended to keep its video content short – like about 5-10 minutes – because they were meant for smartphone users. In the beginning, it was suited for Android and iOS devices but was later supported on AirPlay and Chromecast.

Quibi had the vision to grow as a company for the tale-tellers of the next generation. It also had a team of executive marketing experts and qualified professionals – including Katzenberg himself – who knew how to roll the dice to get the desired numbers. With a spending of over $1.75 billion, they signed up some of the renowned A-list Hollywood stars to promote their content, spent hundreds and thousands on advertisements, and finally were able to snag some success for their work. But there was one thing that they lacked: subscribers.

The owners, Katzenberg and Whitman, announced to dissolve Quibi in December 2020 with the explanation that it didn’t succeed. But what was the reason? Although many factors contributed to Quibi’s downfall, there were two main reasons for their mind-boggling downfall:

  • Their idea did not generate enough buzz in the internet market to attract users and increase the base of their subscribers.
  • Their content failed to entertain people the way they had expected because their timing was not correct. COVID-19 adversely affected their streaming competitiveness in the landscape.

According to a statement by Katzenberg, they believed that the pandemic was the right time to launch the service because people were in lockdown and might prefer entertainment on their phones instead of streaming content on the television. His prediction was right, and one can argue that their timing was perfect. In an eMarketer survey, it was claimed that people spent most of the time using their mobile devices during the 2020 lockdown. Hence, their statement of improper timing contradicts with the survey fact.

In the rising failure of Quibi, there are many lessons to learn for those willing to become star-studded entrepreneurs and future leaders. Let’s delve into the strategic lessons in the story and understand what went wrong with Quibi.

Your Distinction is Your Identity

Quibi made a blunder by offering premium services to new users, which brought it into competition with its rivals like TikTok, Netflix, and Disney. People were more familiar with these services and found better premium content. Also, they thought that having short-clips rather than hour-length videos would set them apart, but users didn’t get their niche aligned with their perspective.

Moreover, Quibi was under pressure from its competitors like YouTube and the rising TikTok, where users have free access to high-quality services. Hence, they repudiated Quibi’s policies to pay for services that were already free for entertainment. So, this lesson explains that distinct content matters more to attract users from the same market.

Rely on Facts

Quibi’s founders made some hefty assumptions, such as heavy marketing will boost their campaign, hiring Hollywood stars will yank subscribers, and users love short content to kill their boredom – they were wrong. A decade back, Eric Ries introduced the lean method of a startup where he emphasized testing lean models based on assumptions, instead of spending heavily on detailed business models.

In Quibi’s case, they should have tested the waters first instead of relying on their assumptions and experience only. They had no clue that their own ideas were against their strategies because they had a firm conviction about industry standards, which did not work. This lesson has a great emphasis on adopting a trial-and-error strategy at the start rather than negating facts and relying solely on experience.

Invest Smartly, not Heavily

According to a Forbes report, Quibi invested profoundly in its launching year, about $1.1 billion on its content for the series of short clips for the top-tier – about $100,000 for just one minute of streaming. Yet after heavy investment, their shows could not gain enough popularity to attract the audience. The content was not really good to bring fame, neither was it entertaining to the users.

Some of Quibi’s shows appeared to imitate the style of HBO movies, according to an analysis by QZ. Another report claims that Quibi went tremendously spendthrift for the marketing of their content, and spent about $400 million to promote their video content. Quibi also went for a social-media boycott, not allowing users to share any video or image from their content initially. Hence, this became a reason for their disapproval.

This Quibi’s blunder has a lesson for the startups to first build their momentum instead of opting to invest heavily in capital intensive marketing strategies.

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