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Big advertisers want to defer payments, tweak deals with Quibi – report

Quibi's rough start has apparently taken another difficult turn.

Quibi, a short-form, mobile-focused premium video streaming service that has struggled to amass subscribers since its launch April 6, is now faced with some major advertisers looking to defer payments or alter their billing schedules, according to The Wall Street Journal.

PepsiCo, Yum Brands Inc.'s Taco Bell, Anheuser-Busch InBev and Walmart are among those seeking changes due to concerns about Quibi's low viewership and the impact of the pandemic on the streamer's mobile-focused business, the WSJ said. Per the paper, Quibi has been installed by users about 4.2 million times, with Quibi signing up about 1.5 million to its initial 90-day free trial. The service reportedly had forecast having about 7 million paying subs in its first year and up to 16 million in three years.

Quibi, which is currently offering a 14-day free trial, sells an ad-supported service for $4.99 and an ad-free version for $7.99.

Word of advertiser issues with Quibi comes a few weeks after Jeffrey Katzenberg, the Hollywood icon who founded Quibi, told The New York Times that the pandemic and lockdown orders are in large part to blame for the early woes for a service that was banking on people to tune in and catch snippets on their phones while they were out and about. "I attribute everything that has gone wrong to coronavirus," Katzenberg told the pub. "Everything. But we own it."

However, the WSJ noted that execs during an all-hands meeting last week said Quibi is also having trouble due to an over-reliance on scripted programming and too many inactive users.

It's not clear if or how Quibi, which has raised about $1.75 billion, intends to cede to purported demands from advertisers for changes to their agreements. "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," Quibi's head of advertising partnerships told the WSJ.

Quibi is new to the video ad scene, but the whole sector has been feeling pain during the pandemic.

MoffettNathanson today announced it is forecasting the US ad market to decline by 8.6% in 2020, led by a 13% drop in traditional spending and a 3% drop in online ad spending. But the firm is also expecting a quick bounce back to pre-COVID-19 levels in 2021, led by digital.

"By 2021, we estimate that digital ad spending – even excluding the TV dollars that go into AVOD platforms like Hulu, Peacock or Pluto – will source 54% of all ad spending in the US," Michael Nathanson, MoffettNathanson analyst, wrote in a report issued this morning.

If Quibi can hang on and its mobile-focused model proves to be correct as people start to move around again, the tide might still turn for it and others in the online ad biz. Nathanson expects that sector to grow in the "low double digit range" over the next five years.

He likewise expects the share of online advertising in the US to reach about 50% by the end of 2020 and climb to 63% by the end of 2023.

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— Jeff Baumgartner, Senior Editor, Light Reading

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