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What went wrong with Quibi?

As the mobile-first video app announces it will shut down on 1st December, Grabyo CEO Gareth Capon looks at what went wrong for the billion dollar streamer.

Six months ago, Quibi launched as a premium online streaming service for mobile-first, glossy short-form video content.

The premise was exciting and tailored for the modern video market. Consumers are watching more short-form video than ever on social media, and prioritise any content they can access on their smartphones, from anywhere at any time. Mobile video has been the fastest-growing sector of the video market for the last decade, so this seemed like the perfect place to launch a new subscription service.

The rationale was that consumers would pay for short-form video with high production values, a mobile-centric viewing experience and the draw of big celebrity and major producers.

Unfortunately this week, Quibi announced it was shutting down. Despite raising more than $1.5 billion to launch the service, it failed to convert 90 per cent of its free trial users to paying customers. So what went wrong?

The Covid effect

One reason that founder Jeffrey Katzenberg highlights is the effect that Covid-19 has on the media industry.

We will never know if, without Covid, Quibi may have survived, but there were things it could have done to increase its resilience, and offer a more enticing prospect to consumers.

Firstly, mobile-first video is important. Consumer adoption of smartphones and mobile video viewing has never been higher. There are more than 4 billion smartphones worldwide today and this number continues to grow every year. Grabyo’s 2020 At Home Video Trends report found that roughly 62 per cent of consumers in the United States and the UK watch video regularly on a smartphone, while 25 per cent of those viewers say that they watch video on a smartphone most often.

Where Quibi fell short was its focus on a premium subscription service that was limited to a single device. Mobile video is important, but that does not mean that streaming video on other devices is not important either. The Connected TV platform is one of the fastest-growing devices for YouTube, this represents the opposite trend, a mobile-centred video platform now making its way to TV.

The breadth of content available and the method for serving that content to users is also hugely important for mobile video services. Platforms such as TikTok, YouTube and other social sites benefit from the enormous amount of content that is available. Much of this content is user-generated, but that does not matter, as UGC video is perfectly suited to a mobile viewing experience. Short, often vertical and focused on sharing with friends.

TikTok has enjoyed enormous growth through the pandemic period, as it is a mobile video experience that focuses on human interaction and communication, as well as content. Smartphones do a lot of things, but they are still used by most consumers for communication, so the most successful video experiences combine great content with community, which is something Quibi lacked altogether.

The other challenge for Quibi was its range of content, which hindered its competitive edge, and this is where the Covid effect comes into play. The entertainment needs of consumers changed at the time when Quibi launched, so did their social behaviours. With most people locked down and staying at home, there was much more time available to spend in front of the TV. Quibi now had to compete with the content portfolio dominance of Netflix, Amazon Prime Video and Disney Plus, all available across a huge number of devices.

With Quibi focused on smartphone viewing, its best content was locked to a single screen, where it would compete with TikTok, Instagram and the many hundreds of notifications which appear on most mobile devices every day. Getting consumers to pay for a new service in that environment is tough. Quibi did, however, try to shift its offering to match viewer demands. It launched the ability to Airplay the app to TV, so consumers could watch on a bigger screen. But this wasn’t broad enough for the audience and was too late to turn the tide.

During social distancing or isolation measures, there is little need for the convenience of watching Quibi at the bus stop or on the commute home, which meant some of Quibi’s USP was all but taken away. There is an economic consideration too, many people were out of work during Covid, with unemployment hitting the younger demographic groups the hardest. Quibi had to compete with millions of TikTok videos…and also had to compete with “free”.

For consumers, Quibi sat just in between the sharable, free, viral market for social video and the high production value, multi-device OTT services, which are viewed both on mobile and the TV screen. With more time for consumers to watch feature-length series from Netflix, and the abundance of free-to-access social video from celebrities, sports stars and influencers from every genre, as well as content from friends, Quibi’s offering got lost.

Growth plans

Nobody could have predicted 2020 would turn out the way it did. But there are lessons for others who might want to follow in Quibi’s footsteps.

The subscription price point of $4.99 (around £4) in the market was reasonable, it was a low monthly cost that consumers are used to for streaming services, and sat at around half the price of Netflix.

However as mentioned, its lack of content was a big factor in why it struggled to retain customers. Many decided the value proposition wasn’t there. Grabyo research in 2020 showed that most US consumers already have signed up to two or more streaming services, making it increasingly hard for each new entrant wanting a share of the customer wallet.

Given a longer run, Quibi would have needed to quickly expand out of the US. Perhaps it didn’t have the time or the plans to do so, but to reach consumers outside of the US you need to a broader, localised content offering.

Quibi acknowledged this, slating some UK-made shows for its launch into the UK, but it wasn’t quick enough, it relied too heavily on its existing library in a highly competitive domestic market.

A freemium-type model might have stood Quibi in better stead during its early stages of growth.

Consumers are receptive to free advertising-funded video platforms, which includes social media and OTT services such as Peacock, Tubi and Pluto TV. Quibi initially attracted over 7 million viewers to the platform for a free trial – more than enough eyeballs to attract advertisers, but the service did not retain a free tier leading to a huge retention issue once the payment tap was turned on.

Offering the option to access part of its library with ads, or the option to pay to remove ads, would have created options to stay with the service for a wider range of consumers, particularly younger users who have a lower propensity to pay.

This could have been accelerated if Quibi had managed to expand beyond the US, working with local advertisers and offering localised audiences could have offered a new source of revenue for the platform.

A delayed future

It’s fair to say Quibi was ahead of its time, the innovative two-screen mobile format that combined horizontal and vertical video viewing was one of the more interesting developments in mobile video in the last few years.

It’s hard to predict that without Covid and the lockdown, whether a proposition like Quibi could have retained its place in the content mix. But any service that aims to do so, must diversify its revenue streams, appeal to a broad range of consumers, and understand the fundamentals of the platform and the audience that you serve.

The most successful short-form video services are free, led by community and encourage users to connect with each other. Yet the demand for high-production mobile video increases all the time, maybe Quibi was just too early and mobile-only video subscriptions will emerge in the future.

It’s a shame Quibi lost before it had its chance, but mobile video and connected viewing will live on for the long term, with celebrities versus creators being the focus of the new mobile streaming wars.