Quibi, the short-form entertainment service for mobile devices, announced on Wednesday that it will shut down, just over six months after its service launched.
The company, which was founded by Hollywood producer Jeffrey Katzenberg and led by CEO Meg Whitman, raised $1.75 billion ahead of its launch in April. The app features short-form news and entertainment videos (or "quick bites") running 10 minutes or less in length. It attracted top Hollywood stars for its shows too, such as Chrissy Teigen and Idris Elba. Investors in Quibi included legacy media companies like Disney, Comcast's NBCUniversal, and AT&T's WarnerMedia.
The company said in its announcement that it's making a proactive decision to preserve shareholder equity, and will return the remaining funds to investors. Quibi alerted its investors and employees of the news Wednesday afternoon.
"While we have 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," Whitman said in a press release. "We continue to believe that there is an attractive market for premium, short-form content. Over the coming months we will be working hard to find buyers for these valuable assets who can leverage them to their full potential."
Shortly after Quibi's launch, there were already signs that it had failed to sign up subscribers for its $4.99-per-month streaming service as it fell in Apple and Google's app store rankings of popular apps. According to people familiar with the matter, Quibi originally projected it would have more than 7 million subscribers after its first year, but it only had about 500,000 subscribers as of a few weeks ago.
The app was originally pitched to appeal to a younger demographic eager to watch short videos while on the go. But Quibi launched just weeks after the coronavirus pandemic hit the U.S., and reviewers panned it for not having an option to watch on televisions. Meanwhile, established streaming services like Disney+ and Netflix saw their subscribers spike.
In their statement Wednesday, Katzenberg blamed the timing of Quibi's launch and the possibility their idea wasn't viable enough for the company's failure.
"Quibi is not succeeding. Likely for one of two reasons: because the idea itself wasn't strong enough to justify a standalone streaming service or because of our timing," the said. "Unfortunately, we will never know but we suspect it's been a combination of the two. The circumstances of launching during a pandemic is something we could have never imagined but other businesses have faced these unprecedented challenges and have found their way through it. We were not able to do so."
Since then, reports surfaced that Katzenberg and Whitten were seeking additional funding to keep Quibi afloat as subscriber numbers failed to meet expectations. On Tuesday, The Information reported that Katzenberg attempted to sell Quibi's catalog of content to Facebook and NBCUniversal in an effort to avoid a bigger loss for the company's investors.
According to people familiar with the matter, Quibi had difficulty selling itself to a larger company because it only owned its content for two years, meaning any potential buyer would just be purchasing Quibi's technology.
But Quibi's technology came with its own baggage. The company faced a lawsuit from the interactive video company Eko, which claimed Quibi violated Eko's patents for mobile video technology. The Wall Street Journal reported in May that hedge fund Elliott Management financed Eko's lawsuit.
"All that is left now is to offer a profound apology for disappointing you and, ultimately, for letting you down," Katzenberg and Whitman said.
Disclosure: NBCUniversal is the parent company of CNBC
--CNBC's Alex Sherman contributed to this report.
Correction: This story has been updated to reflect Meg Whitman is the CEO of Quibi and not a founder.