failure-of-Quibi

Quibi, short for ‘Quick Bites’, was a short-form (and short-lived) mobile-focused subscription streaming service launched in April 2020. The platform cut up premium, Hollywood-style TV episodes and films into 10-minute chunks. Pinned as the most highly anticipated startup of 2020, Quibi had a star-studded executive board of Hollywood veterans, $1.75bn investment from the likes of The Walt Disney Company, Time Warner and Alibaba Group, and a target market of millennial and Gen-Z viewers. Sounds like a recipe for success. Why then was it forced to close the curtains after just 6 months?

Quibi’s founder, Jeffrey Katzenberg, blamed the pandemic, a different tune to the teams at TikTok and Disney Plus. Quibi’s ‘old Hollywood’ culture is more likely to blame. Its executives ignored the streaming service’s most critical element: its target audience.

So, what can businesses learn from Quibi’s rapid downfall?

1. Know who your customer is and design for them specifically  

From its inception, Quibi made fatal assumptions about its target customer. This could have been avoided with some basic customer testing. Firstly, it assumed that young audiences:

  1. Want to pay for premium short-form content
  2. Can’t find this content anywhere on existing video-on-demand (VOD) platforms

Quibi’s founders failed to recognise that young people don’t care about content being readily cut up into 10-minute episodes. A pause button on Netflix, Amazon Prime, YouTube or Disney Plus does the job for them, plus offers the flexibility of rewind and replay. As such, Quibi’s short episodes were not an effective unique selling point (USP).

Quibi’s founders also did not regard Netflix, Disney Plus and Hulu as competitors, since just 10% of their views came from smartphones. They assumed that YouTube didn’t quench audiences’ thirst for ‘A-list Hollywood’ content, nor did Netflix satisfy their demand for short-form content. However, Quibi were inevitably competing in the streaming wars. They were up against some disruptive players and their failure to acknowledge this was crucial.

Quibi were inevitably competing in the streaming wars. They were up against some disruptive players and their failure to acknowledge this was crucial.

Secondly, Quibi’s executives assumed that A-listers attract young subscribers; they couldn’t have been more misinformed. Research shows that young audiences favour influencers from YouTube or TikTok over traditional celebrities; they’re more accessible, relatable and representative. Some basic market research would have saved Quibi time and money chasing Hollywood stars for expensive content deals. Quibi’s ‘old Hollywood’ executives alienated the influencers approaching them with content propositions and de facto their target audience.

Quibi’s USP showed a total disregard for their target consumer, not a good start when entering an already crowded and well-established market.

2. Innovative technology doesn’t guarantee product success

No high-end technology was going to hide Quibi’s ineffective product-market fit. The executives’  lack of understanding of their target audience prevented them from properly testing their technology, including their minimum viable product (MVP). This amounted to a weak product with mis-matched functionality. For example, you initially couldn’t screen record or screenshot within the app. This inhibited the spontaneous ‘virability’ of Quibi’s shows on social media. Go on, try name one! Rolling out the functionality months after catching on was too late.

Quibi should have taken a leaf out of the Lean Startup Playbook, to build, test and learn. They could have saved money up front, and deprioritized the development of cosmetic features such as a perfectly rotating video.

3. Marketing won’t save a product that doesn’t hold the customer at its core

Quibi’s success rested heavily on a strong marketing strategy to draw new eyeballs to pay attention and money for 100% original content that nobody had ever heard of before.

Quibi’s $400 million marketing spend also unintentionally targeted a 50+ year old demographic, not young adults. It focused too heavily on traditional methods of advertising, such as a $5.6 million 30-second Superbowl ad, and totally ignored social media as an advertising method. This hindered Quibi’s community building, an area its competitors – TikTok, Netflix – excel at.

Quibi vs. Disney Plus

The Walt Disney Company entered the streaming warzone aggressively in November 2019 with Disney Plus. Conscious of its family-friendly content library, yet confident given the content’s billions of fans globally, it modestly priced itself at $4.99/ month (with ads) and $7.99/ month (without ads). Disney Plus also offered an annual subscription of $69.99/ year; this aimed to tackle high rates of lost subscribers after free trials ended and buy time to discover what worked and what didn’t on the platform. Quibi, by contrast, cost $4.99/ month for new content with no pre-existing fan base. Comparing the two platform’s pricing strategies against their stark difference in brand consolidation and content libraries highlights Quibi’s overconfident market entrance. 

Comparing Quibi and Disney Plus’s pricing strategies against their stark difference in brand consolidation and content libraries highlights Quibi’s overconfident market entrance.

Despite owning the world’s most lucrative IPs, Disney knew it needed to arm itself with more content to bolster its offering. This drove its decision to acquire 21st Century Fox for $71.3 billion including star assets like The Simpsons. Quibi didn’t have the spending power to buy a major studio. However, its decision to commission 100% of its content was clearly misjudged. 

The Disney Plus case study highlights how humility is key to building and launching a product. You need to first convince people to subscribe before you can use and leverage their data.

Take stock

The key lesson from Quibi’s downfall? Don’t be complacent. Quibi jumped the gun by investing over $1 billion in original celebrity shorts and technology to optimise mobile viewing, before testing whether this was what young audiences wanted. They skipped the last two steps of a ‘build-measure-learn’ approach. Why? Because Quibi’s executives’ thought that they knew what young audiences wanted.

The three lessons Quibi teaches us are mistakes any business can make and learn from. At the crux of this story is that startups – which Quibi was – typically succeed because they understand how crucial knowing your customer and orienting your product around them is to success. Startups are meant to be able to survive failure because they’re hungry, aggressive, innovative and agile. Quibi was none of these things; it was a traditional Hollywood studio disguised as a 21st century startup.

Startups are meant to be able to survive failure because they’re hungry, aggressive, innovative and agile. Quibi was none of these things; it was a traditional Hollywood studio disguised as a 21st century startup.

The red flag for investors should have been when Katzenburg said that up until launch, Quibi runs on “instinct, judgement, and experience about what we launch, how we launch it, how many shows we launch, [and] the publishing schedule” and only after launch “it’s all about the data”.

When product-market fit and judgment is off from the start, it’s too late for data to save the day.