Who would buy Quibi? List of potential acquirers by industry expertsSeptember 23, 2020
- Five months after launching its subscription platform, the mobile-video startup Quibi is mulling a possible sale, The Wall Street Journal reported this week.
- With serious issues still plaguing the business, Business Insider asked four experts who might want to buy Quibi and why.
- The experts Business Insider spoke with had varying views on who might buy Quibi, but all agreed it was a hard sell right now.
- Potential buyers included a telecom like T-Mobile, a content creator like Disney, or a streaming-music company dabbling in video like Spotify.
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Five months after launching its subscription platform, the mobile-video startup Quibi is mulling a possible sale, The Wall Street Journal reported this week.
It’s one of a few strategic options that the company, which raised $1.75 billion from investors and secured $150 million in ad commitments ahead of its launch, is said to be considering. It’s also exploring raising more money from private investors, or going public through a merger special-purpose acquisition company, according to the report.
A Quibi spokesperson told Business Insider in a statement this week that it does “not comment on rumor or speculation.”
Quibi has had a rough go of it since its April debut. The service, originally intended to be used on-the-go, struggled to convince people to pay for its mobile-video subscription with minutes-long TV shows and movies amid the pandemic and economic downturn. Quibi’s shows, some of which hail from or star Hollywood heavyweights like Sam Raimi, Liam Hemsworth, and Anna Kendrick, also failed to break through. And, Quibi got slapped with a patent lawsuit over its “turnstyle” technology, which changes the orientation of the video when a user rotates their smartphone and was touted by the company as a key differentiator for creators and viewers.
With serious issues still plaguing the business, Business Insider asked four experts who might want to buy Quibi and why.
The experts Business Insider spoke with had varying views on who might buy Quibi, but all agreed it was a hard sell right now. A more likely option, one of the people said, would be raising additional funds from private investors and trying to prove out its premise as the economic overhang of the pandemic resides.
“At the end of the day, if there’s any other option, I dont think they’ll sell it,” Sebastian Blum, partner at the global consulting firm OC&C Strategy Consultants, told Business Insider. “If they sell now, they become interesting to buyers at much more depressed level,” he said, referring to a scenario in which investors merely try to get whatever they can for a company, even if they take a loss.
Here are potential types of buyers for Quibi, if it pursues a sale:
- T-Mobile or another telecom: T-Mobile CEO Mike Sievert praised Quibi at CES in January, when the companies teased a deal to offer Quibi to the telecom’s wireless customers, who get the service free for one year with certain packages. If T-Mobile customers are watching Quibi, the telecom might want to buy the service for its content, hoping to reduce cancellations among its mobile audience in the US by offering exclusive access to the platform. The investment would be a marketing expense for T-Mobile, so it wouldn’t face the same pressure to profit off the platform that other buyers might. “They can probably make some calculation to make it work,” Blum said. “Telcos I can see as the strongest case for.” Sparrow Advisor’s principal and cofounder Ana Milicevic also made a case for T-Mobile to buy Quibi, but said the lack of break-through programming and the spectacular failure of rival Verizon’s short-form video service, Go90, should dissuade any telecom from such a deal.
- Disney or another content creator with an array of established brands: Since content hasn’t been Quibi’s strong suit, the startup could considering selling to a company like Disney that has franchises people love and is pushing into streaming. “Is there somebody with content that would look at the way Quibi is thinking about distribution and see that as a complement to the forms of distribution they already have?” said Stephen Beck, founder and managing partner of consulting firm cg42. Disney might consider rolling Quibi into Disney Plus and creating shorts for Star Wars, Marvel, and Pixar to keep subscribers engaged between big releases, for instance. The strategy could be especially fruitful if the pandemic continues to slow down productions. Disney, of course, would have to determine that it’s faster and cheaper to acquire Quibi than build its own version. The legacy-media giant might also not have the appetite for such a deal right now, given that the pandemic has ravaged its park business, and other parts of division are going through major transitions.
- A music service that’s dabbling in video, like Spotify or Deezer: Similar to a telecom, a music-streaming service wouldn’t face the same pressure to profit off video that another buyer would. The major platforms are using video mainly to boost engagement with their primary offerings: music and podcasts. Spotify, for example, launched video podcasts recently to build on the audio experience. A music service could still see some value in acquiring Quibi for its video platform.
- Social-media and private-equity companies could also take an interest, but experts said they’re longshots: A company like Snapchat might be interested in acquiring Quibi to build out its premium-video platform, some experts said, but it wasn’t clear that Snapchat would gain anything from Quibi that it couldn’t create itself. Private-equity firms also tend to be likely buyers for businesses trying to turn themselves around. But, in Quibi’s case, the experts said private-equity firms might be leery because the streaming space is crowded. It’s unclear how much of a return investors could realize in five or so years, when private-equity firms usually look for the exit. “Private equity is going to be more thoughtful,” said Scott Rostan, founder and CEO of Training The Street, which teaches Wall Street professionals about topics like M&A. “Do they want to jump into a highly competitive space? Is Quibi the next TikTok? Probably not.”
Quibi would be a hard sell right now
As the experts said, Quibi would be a hard sell right now.
There are a few issues hanging over the company that might give buyers pause:
- Quibi does not own the content on its platform; it licenses the projects exclusively for period of time, and, after two years, creators can shop a film-length version to other distributors. Therefore, Quibi has no inherent IP value. And content was the driver behind recent media deals such as Disney’s acquisition of Fox’s assets and AT&T’s purchase of Time Warner.
- Since Quibi doesn’t own content, the real value in the company lies in its distribution model and platform, which the company has not yet proven can attract subscribers and be monetized sustainably.
- Quibi is also facing a patent lawsuit that’s being backed by activist hedge fund Elliott Management, which raises questions about the value of its technology.
- Lastly, it’s hard to zero in a on a fair price for Quibi without seeing its financials. The company raised a lot of money from investors already, and there are no other companies quite like Quibi to compare to.