Quibi founder Jeffrey Katzenberg is considering various strategic options for his troubled, six-month-old short-form video streaming service, including a sale, according to Wall Street Journal sources.
Katzenberg and Quibi CEO Meg Whitman "have already pitched at least one potential acquirer in the last week," adds Recode, based on industry sources.
The options being assessed also include raising additional funds or going public through a special-purpose acquisition company or SPAC, described by WSJ as “essentially a blank-check company that helps fund deals.”
Quibi declined to comment to WSJ on whether it is engaged in a strategic review. The company released a statement saying the launch has been successful and that Katzenberg and Whitman, are “committed to continuing to build the business in the way that gives the greatest experience for customers, greatest value for shareholders and greatest opportunity for employees.”
Recode questioned what a Quibi buyer would actually get, outside of some cash ("a source familiar with the pitch says the company has said it has more than $200 million on-hand") and the "Turnstyle" tech that adapts the video view when a user turns a phone 90 degrees.
The tech's possibilities are being demonstrated by a new series on Quibi, "Wireless," which enables viewers to see different versions of the video content on the screen depending on what angles they're holding their phones. But Turnstyle is also the subject of a patent lawsuit against Quibi brought by video tech company Eko with backing from activist hedge fund Elliott Management Corp.
In addition, Quibi doesn’t own most of the shows it paid to develop and feature on the app, but instead has multiyear licenses, with rights reverting thereafter to the companies that made them, according to Recode.
Quibi, which drew $1.75 billion in investments from companies including Walt Disney, NBCUniversal and WarnerMedia, might attract interest from big media or tech companies if it were to pursue a sale, the sources said.
Seeking Alpha speculated that the app’s short video format might be a good fit for a platform like Snapchat Discover.
Katzenberg has blamed disappointing consumer uptake of the app — which was mobile-only when it launched in April — on the pandemic, which has limited people’s mobility. The app has since been made capable of streaming to TV sets.
Despite heavy marketing spending — including $58.5 million in national TV advertising since its launch, according to iSpot.tv — Quibi is “on pace to miss its initial paid subscriber target by a large margin,” according to a WSJ source. Last month, Quibi changed media agencies, moving from Wieden + Kennedy to Universal McCann.
Major advertisers including PepsiCo, Yum Brands, Taco Bell, Anheuser-Busch and Walmart committed a combined $150 million to Quibi’s launch. But according to reports, post-launch, some advertisers asked to defer payments due to pandemic-related ad budget reductions and concerns about Quibi’s viewership performance.
In the U.S., Quibi charges $4.99 per month for its ad-supported version and $7.99 for its ad-free version. But many of its initial subscribers were generated through free-trial offers, and it’s not clear how many of those will choose to begin paying at the end of the trials. In addition, T-mobile is giving a free, one-year Quibi subscription to customers on its unlimited wireless family plans.
In early July, Quibi said it had more than 5.6 million downloads, and denied an Apptopia report indicating the app was experiencing higher-than-usual cancellation rates at the end of its 30-day free-trial period. In early August, a Kantar Entertainment On Demand survey showed 33% of Quibi subscribers saying they planned to cancel within three months.
Also in August, news broke that Quibi was launching a free, ad-supported tier in Australia and New Zealand. In addition, it reduced the price of its ad-free subscription tier in those markets, from $12.99 AUD to $6.99 AUD (or about $9 to $5 U.S.). On that news, the company said it was assessing the viability of various business models on a market-by-market basis.