CIA - I Principles of Lean Start-Ups Fahd Abdulla 2023215 Pearl kamra 2023264 Cassandra Sonia Noronha 2023248 Karedla Havila 2023293 Submitted to: Professor Malmarugan Devanathan Introduction It's difficult to stay afloat in a market with so many competitors. Many businesses don't even last a month before shutting down! Quibi was one of the most egregious failures among them. Meg Whitman and Jeffrey Katzenberg created Quibi, which was essentially a video streaming service platform with original environmental programming. Meg Whitman, a former CEO of Hewlett Packard, helped Quibi raise approximately $1.75 billion. Quibi took a step forward and launched its own category of series and movies, similar to Netflix and Amazon Prime's original content. Despite the fact that Quibi's episodes were barely five to ten minutes long, it charged $4.99 each month. In its first year, Quibi spent over $1 billion on commissioning original material, totaling 8,500 short-form episodes and over 175 series. Unlike many other streaming video sites, Quibi's material was created exclusively for mobile devices and could be seen in either a 16:9 horizontal or 9:16 vertical aspect ratio (with the user able to shift between them in the same video). Content on Quibi was presented in 10-minute installments rather than half-hour TV episodes or two-hour blockbusters. Timeline Information The Economic Situation: Quibi’s lifespan lasted only 8 months from its launch in April 2020 to December 2020. The company started providing its streaming services during the onset of the pandemic. The pandemic hit the world by surprise and stirred up the world economy since no one expected or knew how to deal with the novel situation. The COVID-19 pandemic expanded at an alarming rate, infecting millions and bringing economic activity to a halt as governments enforced harsh mobility restrictions to stem the virus's spread. Global GDP was expected to shrink by 5.2 percent in 2020, according to the baseline prediction. Growth rates in different regions had fallen, with central Asia and Europe growing by a meager 4.7%. With the economy at the risk of slipping into a recession with people not able to pay the rent or other basic utilities, there were concerns of rising unemployment. On the other hand, the entertainment industry faced a temporary halt with cinemas closed but another way of providing entertainment was through online streaming services. The streaming video services took off and did extremely good. As a result, stay-at-home customers may enjoy premium TV and movies across several screens and providers. While industry analysts had noted that this trend was already underway, many believe that the epidemic has accelerated the rate of adoption. The trend towards digital streaming quickened and revenues skyrocketed to $61.8 billion which was a 31% increase. Globally, there are currently 1.1 billion online video customers, a 26 percent increase from 2019. Despite the economic conditions being favorable, Quibi wasn’t able to sustain the business and acquire the required number of subscribers. Other Factors affecting the Business ● Slow productivity growth and a lack of attention on efficiency and productivity has been at conflict with the economic expansion of the last decade. COVID-19 lowered productivity even further by complicating corporate procedures. The cost of working in a socially disconnected society was rising. ● Statistics show that a large percentage of people still keep their cable subscriptions. In 2020, around 68% which is two-thirds of households in the US kept their cable subscriptions. But the same people also used the streaming service. One of the reasons for not fully being committed to online viewing could be that some of the content provided on TV is still not available on streaming services such as the news or sports content. ● Competition from other companies is huge. There is battle among already existing companies as to who will acquire the copyrights first. There is also a war for the creation of new series and movies based on books or true incidents. If one company is slightly slow in acquiring it, another is going to snatch the opportunity and reap the benefits. A survey conducted by DailyMail shows the potential demographic interested in the service: Competition: Some of the main competitors of Quibi were YouTube, Netflix, Hulu and Amazon Prime. YouTube: Founded in 2005, YouTube is a video-sharing network that allows users to publish, watch, and share videos. The content diversity on this platform is unmatched from comedy to vlogs and health and wellness. And all of it is available for free. Although YouTube may not have blockbuster movies, it provides some unique content to keep users hooked. Netflix: Netflix started as an online DVD-rental store in 1997 but shifted to a streaming service that provides TV episodes, series, movies, anime, documentaries, and other content. It offers an array of movies and TV shows with high-quality original shows. Netflix had 10 of the most watched series for the year 2021. Moreover, Netflix was one of the first in this industry and had the first-movers advantage and enjoyed customers loyalty for a ling time. Hulu: A streaming service that provides live and on-demand TV and movies. Here you can find movies and TV shows categorized by TV networks such as FX, Cartoon Network and ABC. So, viewing some of your favourite TV channels has become easier with Hulu. It also streams original programs which have become a success. Another advantage Hulu has is that it offers its services at a much cheaper rate compared to other streaming companies. Amazon Prime: Started by the online retail giant Amazon Inc., Prime offers not only speedy shipping but also on-demand video streaming through a subscription service. In reality, prime has a greater library of movies and series compared to other streaming services. It also produces its own original content which enables the creation of brand awareness. It has the advantage of attracting customers because of the additional benefit it provides with online shopping. Reasons Why Quibi Failed: It's tempting to go with the flow and assume Quibi was doomed from the start because it's been in the crosshairs of tech journalists and experts and has received a lot of negative feedback and even mockery. Nonetheless, some of the entertainment industry's greatest names were confident enough in the app's future success to invest over $2 billion in it. Quibi's failure was not as obvious in its inception as most online articles would have you believe. With enough money in the bank and a team with a proven track record (and powerful connections) in the entertainment business, Quibi's failure was not as obvious as most online articles would have you believe. Here are some reasons why Quibi failed: 1) Coronavirus: The epidemic was an obvious and convenient reason that permitted the leadership team to keep their dignity. People's routines altered, and the train and metro trips, as well as the long lines in stores that Quibi had become accustomed to, were considerably less common. Nonetheless, TikTok usage grew throughout the epidemic, and TikTok, like Quibi, is apparently reliant on mobile usage. This shows that consumers didn't completely abandon their phones in favour of their TVs and computers as a result of COVID, and while the Coronavirus may have made Quibi's job more difficult, it was clearly not the only cause of the app's demise. 2) Content Creation: Any video streaming platform requires engaging content to keep consumers engaged. Especially when it comes to the title, which is what will persuade viewers to watch the show and subscribe to the platform. However, Quibi produced a slew of substandard content that was given only a cursory examination. Despite spending a lot of money and time, the developers were unable to produce standardised content. The concerts on Quibi's were exceedingly uninteresting, and the audience had no interest in them. 3) Marketing: Quibi appears to have completely overlooked the fact that customers subscribed to their streaming services for the content rather than the service itself. Rather than promoting its best shows, Quibi concentrated all of its marketing efforts on the platform and its distinctiveness. Furthermore, Quibi's marketing efforts were more akin to traditional brick and mortar firms' ad campaigns than to B2C internet start-ups’ social-heavy, virality-based, low CAC strategies. Consider Quibi's costly Superbowl ad, which was released before product was even available. 4) High pricing: Quibi's pricing was quite high for such a substandard content supplier. A regular subscription cost roughly $5, while a non-advertising subscription cost around $8. These were astronomically high for a bad content supplier like Quibi. 5) Lack of Problem Validation: The fact that the service originated in Hollywood rather than Silicon Valley was certainly advantageous in terms of content but disadvantageous in terms of running an innovative firm effectively. What is the purpose of Quibi? People may prefer to watch video content on TikTok and YouTube rather than drama series if they have a few minutes to kill on their phone. Quibi never ran a minimum viable product (MVP) or an experimental public beta to see what kind of content and features resonant with their target audience. The premise that people would want to watch short drama series episodes on their phones when they had a few minutes to kill was not proven. As a result, Katzenberg and his colleagues were basically conducting a $2 billion high-risk experiment. These types of tests might have been carried out for a lot less money if they had followed the lean start-up concepts, which have become industry standard in the start-up world. The most common start-up blunder is building something no one wants, and 34 percent of businesses fail owing to a lack of product-market fit. It's difficult to argue that Quibi isn't in this group. It's easy to see how splitting a movie into 20 bits wouldn't offer much value. 6) Overfunding: Overfunding was not the cause of Quibi's collapse, rather it was the cause of the service's demise. Many firms would love to have 500k monthly members paying $5 or $8 for their service, but 500k subscribers with no signs of development are just not enough to justify a $2 billion investment. Quibi put itself in a situation where it could either become one of the big players in the streaming market or be forced to shut down by raising over $2 billion before even beginning. Conclusion: According to a CBS survey, 95% of start-ups fail, that’s 9 out of 10 businesses with an astounding 42% failing due to a lack of a market for the goods or services that they have produced. It is tough to identify exactly why Quibi collapsed, but various reasons, including their content that failed to generate attention, an inability to build its subscriber base, the Covid-19 epidemic, and the competition of the streaming landscape, are believed to have contributed to its disintegration. A big disadvantage to the company was their generic idea which was already well established in the market and had bigger well-known competitors. A start-up should have a unique selling point which would attract customers. Extended research is required to understand the market and come up with innovative products that would appeal to consumers. References Brad Adgate (2021). The Impact COVID-19 Had On The Entertainment Industry In 2020. https://www.forbes.com/sites/bradadgate/2021/04/13/the-impact-covid-19-had-on-the-entertainm ent-industry-in-2020/?sh=52c6c5a250f0 Judy Berman (2020). 8 Takeaways From the Streaming Wars’ Biggest, Weirdest Year Yet. https://time.com/5922040/streaming-wars-2020/ The Global Economic Outlook During the COVID-19 Pandemic: A Changed World (2020) https://www.worldbank.org/en/news/feature/2020/06/08/the-global-economic-outlook-during-the -covid-19-pandemic-a-changed-world
