Quibi says it's shutting down

Details: Quibi said in a statement that it intended to wind down its business operations and initiate a process to sell its assets over the next few months.

• "Following the Company’s wind down and satisfaction of all liabilities, the remaining funds will be returned to its investors as specified in the Company’s operating agreement," the statement said.
• The company noted that its board made the decision to shutter after exploring several strategic and financial options. (Reports previously suggested that the company was considering a full sale but failed to find a buyer.)
• Quibi says app subscribers will receive separate notifications regarding the final date of access to the platform.

The company blamed its woes on changes to the industry landscape and ongoing challenges. "[I]t was clear that the business would not be able to continue operating for the long-term on a standalone basis," the statement said.

By the numbers: The company raised a whopping $1.75 billion to get the app off the ground from Alibaba, as well as Hollywood behemoths like Walt Disney Company, NBCUniversal and AT&T's WarnerMedia.

• CEO Meg Whitman said in the statement that while the company had enough capital to continue operating for a significant period of time, "we made the difficult decision to wind down the business, return cash to our shareholders, and say goodbye to our talented colleagues with grace.”

Earlier on Wednesday, The Wall Street Journal reported that Katzenberg would be informing the board of the move.

• The company hired a restructuring firm to evaluate its options in recent weeks, per WSJ. One of the recommendations was to close operations.
• The Information reported on Tuesday that strategy meetings have recently been canceled.

The big picture: The app, which launched in April, struggled to attract subscribers amid a streaming boom during the COVID-19 pandemic.

• Third-party analytics companies reported over the summer that the app only attracted a few million downloads. The company never officially confirmed any paid subscriber numbers, but Katzenberg told the New York Times in May that it saw 3.5 million downloads. Other analytics companies reported that Quibi struggled to convert most of its free trial subscribers to paid subscribers.
• It also faced a heated patent lawsuit funded by a powerful activist investor over what it considered its flagship technology.
• Quibi was created to provide short-form videos to young users via mobile. Most videos were 7–10 minutes in length, but shot both vertically and horizontally. In recent months, the company had been experimenting with putting some of that programming on TV screens.

Between the lines: The company's business model was contingent on having enough subscribers and eyeballs on its content to sell lucrative ads — a similar model to the video subscription streaming service Hulu.

• Axios reported in March that the company sold out its first year in ads — $150 million in revenue — ahead of its April 6 launch. That number was fixed via pre-sold ad agreements with 10 companies.
• Ad partners included big-name marketers like Progressive, Discover, General Mills, Procter & Gamble, AB InBev, Taco Bell, Pepsi, T-Mobile, Google and Walmart.
• Prior to the service launching, Quibi CEO Meg Whitman told Axios in an interview that she expected the majority of subscribers to choose Quibi's ad-supported plan.

Our thought bubble: Quibi argued that months of stay-at-home lockdowns pushed consumers to TV streaming services and away from mobile-only video. But TikTok, a Chinese-owned short-form video app that's mobile-only, has gained massive traction in that same time, even while facing major regulatory headwinds.

• Quibi's problem was that it raised a lot of money and couldn't live up to the hype. Its programming never produced any smash hits. And consumers never really embraced its "turnstyle" format, which it billed as revolutionary.

What's next: Whitman says the company will work to find a buyer for its assets in the next few months. “We continue to believe that there is an attractive market for premium, short-form content," she said.

Jeffrey Katzenberg is an investor in Axios.