Short, sharp, shut

Amadeo Giannini opened the Bank of Italy in San Francisco in October 1904 with a simple wager: that “the little fellows”, the immigrants whom other bankers ignored, were worth lending to.^{5Santa Clara University Digital HumanitiesAmadeo Peter Giannini} He did not commission a study. He stood behind a counter and watched who came in. Within a year his deposits had passed $700,000.^{5Santa Clara University Digital HumanitiesAmadeo Peter Giannini}

Quibi had more money and less curiosity. On 21 October its founders, Jeffrey Katzenberg and Meg Whitman, announced that the short-video service would close, only about six months after it launched.^{2NBC NewsA look at why Quibi failed so soon after launching22 Oct 2020,3TheWrapQuibi to Pull the Plug on Dec 122 Oct 2020} The app will stop working “on or around” 1 December.^{3TheWrapQuibi to Pull the Plug on Dec 122 Oct 2020} In that time it got through much of the $1.75bn it raised from investors; NBC News reports that about $1bn was spent by the third quarter.^{1TechCrunchQuibi gains 300K launch day downloads, hits No. 3 on App Store7 Apr 2020,2NBC NewsA look at why Quibi failed so soon after launching22 Oct 2020} It had about 500,000 subscribers a few weeks before the end, against a first-year target of more than 7m.^{2NBC NewsA look at why Quibi failed so soon after launching22 Oct 2020}

The easy verdict is that the pandemic did it. Quibi was built for commuters, who stopped commuting in March. Mr Katzenberg first blamed covid-19, then conceded it was not “fair” to put all the blame there, according to NBC.^{2NBC NewsA look at why Quibi failed so soon after launching22 Oct 2020} We agree with the amended version. A service for the queue at the coffee shop was unlucky; it was not doomed by luck alone.

The deeper fault was the order of operations. Quibi sold out $150m of first-year advertising before it had launched, which Ms Whitman called “remarkable” at the time.^{4TechCrunchStreaming service Quibi sells out of its $150M in first-year ad inventory23 Oct 2019} It then asked viewers to pay $4.99 a month with ads, or $7.99 without, for a mobile-only product, after 90 free days.^{1TechCrunchQuibi gains 300K launch day downloads, hits No. 3 on App Store7 Apr 2020} The service initially could not be watched on a television, and users could not take screenshots, which throttled the sharing that makes short video spread.^{2NBC NewsA look at why Quibi failed so soon after launching22 Oct 2020} Rivals such as Netflix and Amazon spent far larger budgets, and Quibi’s shows produced few of the hits it needed.^{2NBC NewsA look at why Quibi failed so soon after launching22 Oct 2020} The founders now say the “product market fit was wrong”, in NBC’s account.^{2NBC NewsA look at why Quibi failed so soon after launching22 Oct 2020} That is a sentence usually written on day one, not on day 200.

The strongest defence of Quibi is that big bets are how new media gets made. A venture-backed firm that never fails is not taking enough risk, and $1.75bn is modest beside the budgets of the streaming giants.^{2NBC NewsA look at why Quibi failed so soon after launching22 Oct 2020} That is fair, and capital lost on an honest experiment is the system working. But Quibi was not an experiment in the cheap, reversible sense. It committed to premium production, a proprietary viewing format and a launch date before a single customer had said the format mattered. The market got its vote only once the money was gone. An honest experiment would have found out sooner and spent less finding out.

The lesson for founders is not to bet smaller but to learn earlier. A cheap pilot, a single city or a handful of shows streamed to a few thousand phones, would have told Quibi within weeks whether people wanted ten-minute episodes enough to pay for them. That would have cost a sliver of the advertising it pre-sold. Capital is a tool for scaling what works, not a substitute for finding out whether it does. Quibi treated the cheque as the proof.

Investors will absorb the loss; they signed up for that. The more interesting casualty is the shows. The company’s own farewell note says that “at this time we do not know if the Quibi content will be available anywhere after our last day of service.”^{3TheWrapQuibi to Pull the Plug on Dec 122 Oct 2020} Programmes made for a screen that few people wanted may now have no screen at all.

Giannini kept his customers because he listened to them first and built the bank second. Quibi did it the other way round, and met its customers only at the exit.