Quibi, the short-form video app founded by Hollywood mogul Jeffrey Katzenberg, is calling it quits after just six months, according to reports.
The high-profile startup — which raised a whopping $1.75 billion for an April launch that coincided with the start of the COVID-19 pandemic across the US — is shutting down amid slumping demand for its videos, the Wall Street Journal reported Wednesday.
The shutdown marks a shocking end to Hollywood mogul Katzenberg’s plan to create a new category of entertainment that catered to people on the go. Looking to build a library of must-watch videos — typically series made up of episodes lasting five to 10 minutes each — Katzenberg had lured A-list stars like Jennifer Lopez, Kevin Hart and Nick Jonas.
But coronavirus lockdowns kept most of the app’s would-be subscribers hunkered down at home in front of their TVs, executives said. Quibi eventually allowed subscribers to its $4.99-a-month service to watch its shows on TV, but some experts doubted whether that was even the real problem.
Tal Chalozin, the co-founder and chief technology officer of online advertising and tech firm Innovid, noted coronavirus lockdowns actually boosted the viewership of services like Netflix, Hulu, Snap and Disney+.
“Viewership is at an all-time high even if ad dollars are limited,” he said. The real problem, he added, was that Katzenberg tried to launch a service with an unknown brand and limited content. With well-known rivals already out there, he said that it is “close to impossible” to succeed.
“The window is closing if not closed already on streaming services — especially an unbranded one,” he said.
The Journal said Katzenberg was informing Quibi’s investors — which included Disney, NBCUniversal and AT&T’s WarnerMedia — that the company is closing after it recently hired a restructuring firm to evaluate its options.
A Quibi spokeswoman declined to comment.
Katzenberg had personally invested $5.5 million in an early funding round, while former HP Chief Executive Meg Whitman, who served as Quibi’s CEO, had plunked down $10.5 million, according to The Information, a tech news site. Both will lose “millions,” as will other backers including Alibaba, Goldman Sachs and Google, the site reported.
Katzenberg, a former Disney executive, recently had tried to sell Quibi’s catalog of programming to companies such as NBCUniversal and Facebook without any success, according to the site. Among the sticking points: that Quibi didn’t actually own many of the shows on its app.
“This is a giant meltdown,” said Eric Schiffer, chief executive of private equity firm The Patriarch Organization. “It is a modern-day Hindenburg within the digital and entertainment arena.”
Schiffer said it is likely that Quibi opts for a so-called “ABC liquidation,” or assignment for the benefit of creditors. Such a liquidation would allow Katzenberg and chief executive Meg Whitman to avoid the stench of bankruptcy, and assign Quibi’s assets to a third party to sell off the assets and pay off creditors.
Schiffer noted that Quibi’s content library, which includes a courtroom reality show with Chrissy Teigen called “Chrissy’s Court,” “The Andy Cohen Diaries,” an animated show based on Cohen’s journals; and a horror anthology from Sam Raimi called “50 States of Fright;” will likely be sold at “fire sale prices.”
News of Quibi’s demise began trickling in last month amid rumors of a strategic review of the company. Also hit by stiff competition from free short-form video apps YouTube and TikTok, Quibi was never able to meaningfully grow its subscriber base. With lower-than-expected viewership, blue chip advertisers like PepsiCo, Walmart and Anheuser Busch, began deferring their payments.
Quibi is also facing a high-stakes lawsuit over patent infringement from rival Eko, which is funded by billionaire backer Paul Singer.
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