Quibi Holdings LLC is shutting down, according to people familiar with the matter, a crash landing for a once-highflying entertainment startup that attracted some of the biggest names in Hollywood and had looked to revolutionize how people consume entertainment.
The streaming service, which served up shows in 5- to 10-minute “chapters” formatted to fit a smartphone screen, has been plagued with problems since its April launch, facing lower-than-expected viewership and a lawsuit from a well-capitalized foe.
On Wednesday, founder Jeffrey Katzenberg called Quibi investors to tell them he is shutting the service down, some of the people said.
Mr. Katzenberg and Chief Executive Meg Whitman decided to shut down the company in an effort to return as much capital to investors as possible instead of trying to prolong the life of the company and risk losing more money, according to the people familiar with the matter.
Employees will be laid off and will be paid a severance, the people said, and the company will explore selling the rights to some of its content to other media and technology firms.
The decision marks a disappointing turn of events for Mr. Katzenberg, a former
Walt Disney Co.
executive and DreamWorks co-founder who pitched the streaming service as a revolutionary new entrant to the video-streaming wars.
Quibi was designed for people who consume entertainment in short increments on their smartphones, but the coronavirus pandemic forced would-be subscribers away from the kinds of on-the-go situations Quibi executives envisioned for its users. Quibi eventually allowed subscribers to watch its shows on their TVs.
Even before the Covid-19 crisis, Quibi had its share of skeptics in the media world, since consumers already had free options for short-form video, such as
YouTube. Quibi’s bet was that it could charge subscriptions by creating higher-end content, and it paid handsomely to develop that programming. Some Quibi executives believed the venture could have been a success, if not for the pandemic, with better execution, pointing to the rise of TikTok, people close to the company said. Some of them believed, for example, that Quibi could pivot to a “freemium” model, offering some content for free while making customers pay for the top programming.
Quibi, which cost $4.99 a month, also had to compete with a growing number of rivals, with Walt Disney’s Disney+,
HBO Max and
Peacock all launching in the past year.
Mr. Katzenberg and Ms. Whitman had raised about $1.75 billion from high-profile investors including Disney, Comcast’s NBCUniversal and AT&T’s WarnerMedia.
The company spent aggressively to develop its content. Its lineup of star-studded programming included a court show featuring Chrissy Teigen, a romantic comedy with Anna Kendrick and an action thriller starring Christoph Waltz and Liam Hemsworth.
Quibi has drawn on the deep Hollywood connections of Mr. Katzenberg, who ran Disney’s movie business, co-founded DreamWorks SKG and led its animation spinoff DreamWorks Animation SKG Inc., the studio behind “Shrek” and “Kung Fu Panda.”
The streaming service attracted blue-chip advertisers including
securing about $150 million in ad revenue in the runup to its launch. Those deals came under strain earlier this year amid lower-than-expected viewership for Quibi’s shows, prompting advertisers to defer their payments.
In recent weeks, Quibi hired a restructuring firm, AlixPartners LLP, to evaluate its options, the people said. It recommended the options to the board of directors this week, laying out a list that included shutting the company down.
AlixPartners didn’t immediately respond to a request for comment. The firm previously handled the bankruptcy of Enron Corp.,
General Motors Co.
Earlier Wednesday, Mr. Katzenberg and Ms. Whitman held a conference call with investors to explain the decision to shut the company down. During the call, Mr. Katzenberg told investors that the company decided to return $350 million in capital rather than pursue a new strategy that could have attracted additional subscribers but would have required a hefty investment, according to a person familiar with the call.
The Information earlier reported that Mr. Katzenberg told people in the media industry he may have to shut down the company.
The decision to hire AlixPartners came after starting a process to sell the company, The Wall Street Journal reported. Quibi pitched suitors including NBCUniversal on a sale, according to people familiar with the matter, but would-be buyers were put off by the fact that Quibi doesn’t own many of the shows it puts on its platform.
NBCUniversal declined to comment.
Quibi is also fighting a legal battle with interactive-video company Eko, which claims Quibi is violating its patents and has stolen trade secrets. Hedge fund Elliott Management Corp. is financing the high-stakes patent lawsuit.
The fight centers on a key feature of Quibi’s app that plays different videos for users depending on whether they are holding their phone horizontally or vertically. Quibi has denied infringing on Eko’s patents or stealing trade secrets.
—Alexander Gladstone contributed to this article.
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