The Death Rattle Heard Around the World: Quibi May Be Shutting Down

Quibi
After just 7 months, the short-form streamer's missteps are finally catching up.

The Wrap is reporting that Quibi might shutter after only seven months in operation. They are gathering the executives to break the news and will return what's left of the initial investor money. Quibi was a big swing that felt like it suffered not only from the pandemic but from not understanding people want entertainment they can watch anywhere. 

As the article goes on to say, "A knowledgeable individual told The Wrap that Katzenberg has been trying to sell the content to other distributors in recent weeks, without success, largely because of the short-form serial format. “The content has to be re-edited to be legitimate,” said this individual. "It’s designed to have 10-minute breaks for commercials."

Time will tell if places like YouTube or other streamers take a chance on the shows. 

So why is it shutting down? 

Well, Quibi was only on track to get around 2 million customers, when they had hoped for over 7 million. These signs were available at the start. Here's a staggering fact: Out of 910,000 people who downloaded Quibi in the three days following its April 6th launch, only 72,000 users converted to paying subscriptions, Sensor Tower reported in July.

Quibi worked overtime to fix problems that they just never saw, like the inability to share screenshots or clips on Social Media and not being able to watch on TVs at home. They also lacked a huge breakout show, and there was never a conversation about something you cannot miss. It was always about the business and how it was bleeding the $2 billion dollars it raised to start. 

The announcement of the shutdown is pending, but the Wall Street Journal reported that Quibi has hired a restructuring firm to evaluate its options, with shutting the company down being one of them. It seems like that's the one favored by all involved. 

We will see what happens. 

Stay tuned.      

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5 Comments

In other news: Nobody wants to pay for Youtube.

October 21, 2020 at 2:39PM

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I ran some numbers a few weeks ago, and the result was that the market can support only up to 6 paying subscriptions (eg. Disney+, Netflix, HBOMax, Paramount+, AppleTV+, Hulu), 5-6 major free ad-based ones (eg. TubiTV, Peacock, Crackle, RokuTV etc), and about 7-8 smaller free ad-based services (e.g. Vudu, Pluto, IMDbTV, Canopy etc). Quibi didn't fit at all into that model.

I believe that we're heading towards major consolidation in the next 4 years. For example, Hulu might not survive as Disney+ adds adult Fox shows as rumored (Disney is the major stakeholder in Hulu and owns 20th Century Fox), while things like Showtime, Epix, Shudder and StarZ will have to merge with their parent companies' streaming services (or sell out) to provide more content richness in order to survive.

As for Netflix, it bleeds money left and right by going for quantity over quality. At least 50% of the shows it provides (over 1300 originals so far), are not watched by viewers. Too much clutter. It makes sense to create a secondary Netflix app (or part of the main app), called Netflix Free or something, and provide that bottom 50% of shows free with ads. At least this way they could recoup some of their costs.

For me, these things are evident and to be expected. The only big unknown is Sony Pictures. They are the only big studio that doesn't own a streaming service. They even sold Crackle, that they owned for years, because their CEO didn't want to follow a streaming strategy back in 2018. But now with the theaters are faltering, let's see how they will survive.

October 21, 2020 at 3:31PM

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Eugenia Loli
Filmmaker, illustrator, collage artist
740

That's a very interesting read. I stumbled upon a study some years back that showed how fewer and fewer people would pirate movies because the streaming services available made it affordable and easy to watch movies. But as the streaming service supply went up, so was the amount of movies and TV-shows being pirated. Simply put people don't want to pay for all these streaming services just like they didn't want to pay for every single cable channel.

For some reason I have a feeling that Sony and Netflix will join forces one way or another. They might be able to benefit from each other.

October 21, 2020 at 5:05PM, Edited October 21, 5:08PM

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That looks like a good idea on paper, but after looking at their valuations, it's unlikely there's a marriage to be had. You see, Sony only makes about $300mil profit per year, which is not enough to buy Netflix that's evaluated at $220bn. Netflix turned positive cash flow this year for the first time for $600mil, and that's not enough to buy Sony Pictures either, since it's valued at $9bn.

There could be a merger instead, but why would Netflix want to do this, apart from getting access to the Sony franchises (the only thing Netflix doesn't have and hurts them: franchises) and studio space. You see, while Netflix is in big debt ($26bn), they have assets of $34bn. What this means (since Netflix hasn't bought many companies) is that they put their shows as collateral. So if a show performs well (e.g. Stranger Things), they will pay that debt back, to keep the IP. But if a show doesn't do well (as most of their shows don't do well), they could decide not to pay the debt, and the lenders will own the IP. This is big risk for lenders, but not big risk for Netflix. You see, if a title doesn't perform, or it's old, Netflix wouldn't care much about losing it anyway. Basically, Netflix has found a very smart way to make billions of dollars worth of shows per year, almost for free...

Another company that would definitely want to buy Sony Pictures, and they have the money, is Disney. This way, they can get back their Spiderman. But I don't think they can pull the wool once more in front of the various commissions eyes to approve yet another big purchase. There are monopoly questions arising after that for Disney, you see, and they might not want that.

Another company that could be interested, is Apple. IF they want to delve more into such IP/franchises, and getting studio space with it.

And yet another, is Verizon. Verizon can justify the purchase because that would position them as media competition against AT&T (that owns Warner/HBO). On top of that, Verizon is the biggest bit provider in the US, and they could create a front-end app for a Verizon-Sony Media streaming app in mere months. The bandwidth and infrastructure would come for free to them.

And then again, Sony could decide to not sell, and write their own app instead. The problem with that is that they're late to the game, and so customer acquisition will be very expensive to them now.

October 21, 2020 at 8:07PM

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Eugenia Loli
Filmmaker, illustrator, collage artist
740

I just looked you up and followed you out of amazement at how knowledgeable you are. (I was also pleasantly surprised to see you've been covered in some Brazilian blogs!).

I've been telling my friends for a while that this streaming situation is patently unsustainable (your prediction says there's much more room then I ever imagined, too). You didn't mention the Criterion Channel: do you think that could make it? I really don't want it to die before it reaches my shores...

October 26, 2020 at 7:40AM, Edited October 26, 7:40AM

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Luan Oliveira
film student in Rio
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