After Botched Rollout, Hollywood-Backed Quibi Reportedly Weighs ‘SPAC’-Backed Offering

After Botched Rollout, Hollywood-Backed Quibi Reportedly Weighs ‘SPAC’-Backed Offering

Tyler Durden

Mon, 09/21/2020 – 15:25

By failing to score even a single hit show, Quibi, the streaming service conceived and run by Jeffrey Katzenberg and Meg Whitman, has managed to squander $2 billion in start-up capital  in just a couple of quarters. With subscription revenue well below where its founders had hoped, the company is reportedly exploring “strategic” options, including a sale.

And in an amusing twist that ties together two of 2020’s business-press punchlines, Quibi is considering raising more money, or going public via a merger with a SPAC – those “blank check” companies that have become so popular this year. It’s just the latest installment in a trend we’re calling “peak SPAC”.

According to WSJ, the company is on track to miss its subscriber revenue targets by a “large margin”.

Making matters worse, the company is also facing a patent lawsuit filed by a deep-pocketed patent troll. Advertisers, who were recruited on the strength of Katzenberg and Whitman’s reputations, have reportedly been disappointed with the low viewership.

Though the company declined to comment on the sale rumors, it released a statement insisting that Katzenberg and Whitman “are committed to continuing to build the business in the way that givs the greatest experience for customers, greatest value for shareholders and greatest opportunity for employees.” WSJ noted that there’s no guarantee Quibi will ultimately pursue any of these “strategic alternatives”.

Quibi – pronounced like “Quibby”, a portmanteau of “quick bites” – is the brainchild of Katzenberg, though he recruited Whitman to serve as CEO. Shortly after that, the company raised $1 billion from investors including major film studios and financial institutions. But WSJ reported that the company is on track to report a $550 billion operating loss for the year (which likely excludes hundreds of millions of dollars of additional investor money wasted).

The massive pile of cash raised by Katzenberg and Whitman allowed the company to recruit top talent like Chrissy Teigen. It even netted the company two Emmys on Sunday.

While that’s all well and good, the company has been subjected to non-stop ridicule online. And reports about the decision making process leading up to the launch painted Whitman and Katzenberg as disconnected from reality, and surrounded by ‘Yes’ men.

On the legal front, Quibi has been accused of stealing its most highly-touted innovation, a feature that automatically adjusts the screen based on whether a phone is being held horizontally, or vertically. The lawsuit was brought by interactive video company Eko.

Launching a streaming service is no easy task, and one would think, given the capital-intensive nature of the business, but the rollout of Quibi was botched so badly, subscribers who signed up for the free trial were immediately put off by the lack of flexibility – videos could only be viewed on mobile devices. And the product was released in the middle of a global quarantine that should have been a massive boon for the company. Instead, Katzenberg and Meg Whitman, the company’s resident pitchwoman, squandered the opportunity with their ridiculous insistence that Quibi by “mobile-only”, an ill-conceived play at differentiation. Katzenberg has owned up to the botched launch, and promised to turn things around.

But if he can’t turn things around, maybe Katzenberg can at least recoup some of that lost money, while sticking gullible SPAC-backers with the bill.

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Author: Tyler Durden

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