Quibi, the mobile-only video subscription streaming service, is shutting down, The Wall Street Journal reports. The company raised a whopping $1.75 billion to get the app off the ground from Alibaba, as well as Hollywood behemoths like Walt Disney Company, NBCUniversal and AT&T's WarnerMedia.
Why it matters: The company has struggled to hit its subscriber growth targets amid the global pandemic. Sources tell Axios Quibi was running out of cash.
Details: Quibi founder Jeffrey Katzenberg called investors Wednesday to tell them he is shutting the service down, the Journal reports.
- The company had hired a restructuring firm to evaluate its options in recent weeks, per The Journal. One of the recommendations firm was to close operations.
- The Information reported on Tuesday that strategy meetings have recently been been cancelled.
The big picture: The app, which launched in April, struggled to attract subscribers amid a streaming boom during the COVID-19 pandemic.
- Third-party analytics companies reported over the summer that the app only attracted a few million downloads. The company never officially confirmed any paid subscriber numbers, but Katzenberg told The New York Times in May that it saw 3.5 million downloads. Other analytics companies reported that Quibi struggled to convert most of its free trial subscribers to paid subscribers.
- It also faced a heated patent lawsuit funded by a powerful activist investor over what it considered its flagship technology.
- Quibi was created to provide short-form video to young users via mobile. Most videos were 7 to 10 minutes in length, but shot both vertically and horizontally. In recent months the company had been experimenting with putting some of that programming on TV screens.
Between the lines: The company's business model was contingent on having enough subscribers and eyeballs on its content to sell lucrative ads — a similar model to the video subscription streaming service Hulu.
- Axios reported in March that the company sold out its first year in ads — $150 million in revenue — ahead of its April 6 launch. That number is fixed via pre-sold ad agreements with 10 companies.
- Ad partners include big-name marketers like Progressive, Discover, General Mills, Procter & Gamble, AB InBev, Taco Bell, Pepsi, T-Mobile, Google and Walmart.
- Prior to the service launching, Quibi CEO Meg Whitman told Axios in an interview that she expected the majority of subscribers to chose Quibi's ad-supported plan.
Our thought bubble: Quibi argued that months of stay-at-home lockdowns pushed consumers to TV streaming services and away from mobile-only video. But TikTok, a Chinese-owned short-form video app that's mobile-only, has gained massive traction in that same time, even while facing major regulatory headwinds.
- Quibi's problem was that it raised a lot of money and couldn't live up to the hype. Its programming never produced any smash hits. And consumers never really embraced its "turnstyle" format, that it billed as revolutionary.
Jeffrey Katzenberg is an investor in Axios.
