Taco Bell, Walmart Among Advertisers Seeking New Deal Terms With Quibi -- Update
May 26 2020 - 4:49PM
Dow Jones News
By Benjamin Mullin and Suzanne Vranica
Streaming service Quibi is beginning to feel the pinch of its
lackluster performance since launching last month, as major
advertisers seek to defer payments and the company looks to cut
costs, according to people familiar with the situation.
The advertisers, which include PepsiCo Inc., Yum Brands Inc.'s
Taco Bell, Anheuser-Busch InBev SA and Walmart Inc., have asked for
the changes because of concerns about the service's low viewership
or the impact of the coronavirus pandemic on their businesses, one
of the people said.
Quibi, which was founded by Hollywood mogul Jeffrey Katzenberg,
struck ad deals valued at $150 million in the run-up to its April 6
launch, selling 10 blue-chip marketers on the prospect of a
mobile-first ad platform featuring short-form movies and television
shows.
As of last week, Quibi had been installed by users about 4.2
million times, and the company had signed up 1.5 million users to a
free 90-day trial, some of the people said. Quibi was initially
targeting about seven million paying subscribers in its first year
and planning to have 16 million customers in three years.
"We deeply value the commitments our advertising partners have
made and are working in close partnership with them to learn and
help them be successful on the platform," Nicole McCormack, Quibi's
head of advertising partnerships, said in a statement.
A Walmart spokesman said the retailer is still an advertiser for
Quibi but declined to discuss the details of its deal.
Representatives for PepsiCo and Anheuser-Busch declined to comment.
A Taco Bell spokesman had no immediate comment.
Many of the biggest players in streaming, including Netflix Inc.
and Amazon.com Inc., have enjoyed surging viewership during the
coronavirus crisis, as homebound consumers watch more programming.
Launching a new service during the pandemic brings special
challenges, from building a brand to creating new content while
production is largely shut down in Hollywood. AT&T Inc.'s HBO
Max, which launches Wednesday, will add to an increasingly crowded
field.
Mr. Katzenberg told The Wall Street Journal earlier this month
that launching during the pandemic has been challenging, but that
he didn't regret it.
During an all-hands meeting last week, Quibi executives said the
Covid-19 crisis wasn't the only factor that has hampered the
launch, a person familiar with the meeting said. An overreliance on
scripted programming, a pool of inactive users and lower-than-hoped
enthusiasm from some viewers all have affected the launch, the
executives said at the meeting.
Mr. Katzenberg was asked in the question-and-answer session how
Quibi is "changing the narrative" around its launch, the person
familiar with the meeting said. Mr. Katzenberg told staffers that
product changes and quality content would help the company
distinguish itself.
The company continues to launch new shows. Earlier this week,
Quibi introduced a series about "Kirby Jenner," a performance
artist who pretends to be related to the Kardashian/Jenner family
of entrepreneurs and reality stars.
In response to another question, Quibi Chief Executive Meg
Whitman said Quibi was taking a number of steps to reduce costs,
including delaying or postponing hiring, not backfilling positions
and minimizing the number of contractors the company takes on.
"We feel like that will get us through," Ms. Whitman said at the
meeting, according to the person familiar with it. "But everyone
needs to really think about, are we spending money like it's our
own?"
Ms. Whitman echoed those thoughts in a statement, saying that
Quibi employees are "wise stewards of our resources."
Quibi has raised $1.75 billion from major movie studios, tech
companies and wealthy individuals. It is betting users will pay at
least $4.99 a month to watch movies and TV shows in "quick bite"
chapters that are shorter than 10 minutes in length.
As part of agreements with some of its advertisers, Quibi
guaranteed it would deliver a certain number of ad views over a
certain period, some of the people familiar with the situation
said. Lower-than-expected viewership has fueled worries that Quibi
won't be able to meet those guarantees and will have to give
additional ad time to make up for the shortfall, one of the people
said.
Some advertisers have requested that their payments be spread
out over a longer period, one of the people said. "They're not even
coming close to hitting their numbers," said another person
familiar with the ad deals.
Quibi has discussed the matter with its ad partners, one of the
people said. "In the advertising business, the relationship often
trumps the letter of the contract," one of the people familiar with
the situation said. "This is a long-term business."
Write to Benjamin Mullin at Benjamin.Mullin@wsj.com and Suzanne
Vranica at suzanne.vranica@wsj.com
(END) Dow Jones Newswires
May 26, 2020 16:34 ET (20:34 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
PepsiCo (NASDAQ:PEP)
Historical Stock Chart
From Aug 2024 to Sep 2024
PepsiCo (NASDAQ:PEP)
Historical Stock Chart
From Sep 2023 to Sep 2024