ESPN pulls plug on cell phone operation
Dozens of employees will lose jobs; subscribership was far below estimates
NEW YORK - ESPN is closing down its cell phone company for sports fans after less than a year, planning instead to forge deals in which it provides content to other wireless operators.
The planned shutdown of Mobile ESPN marks the first major bust in a rush of specialized wireless ventures targeting niche audiences they contend are underserved by the Cingulars and Verizons of the world.
ESPN was quick to stress that its change in strategy had no bearing on Disney Mobile, another ambitious foray into the cellular market by parent company Walt Disney Co. that was officially launched just recently.
Disney has so far invested a combined $150 million in developing Mobile ESPN and Disney Mobile, two of the highest-profile and most-heavily marketed efforts to create an “MVNO,” or mobile virtual network operator.
An MVNO doesn’t have its own wireless network. Instead, it puts its brand on another wireless operator’s service — whose name is hidden from the customer — and offers its own lineup of handsets and calling plans.
Going forward, Mobile ESPN will cease being an MVNO and instead seek to provide its sports scores, news and video highlights to other wireless companies with large customer bases.
Globally, there were already more than 175 MVNO brands either launched or planned as of April of this year, according to the research firm ARCchart.
Some of the new brands stress lower prices and prepaid offerings for users who can’t meet credit requirements. Others focus on immigrant communities, providing cheaper international calls or screen graphics and customer service in another language. For Amp’d Mobile and Helio, it’s the youth market.
Many analysts are skeptical whether it’s a business model that can succeed for the vast majority of these ventures given the marketing muscle of the national players. That a brand as popular and well-funded as ESPN couldn’t make it work adds to that doubt, particularly since Mobile ESPN developed a uniquely sophisticated mobile service compared with the content offered on regular cell phones.
The service has signed up only tens of thousands of subscribers since it launched the service in late 2005 and began advertising early this year, with commercials appearing regularly on ESPN’s cable TV broadcasts. That struggle contrasts sharply with ESPN’s success as a provider of news on cell phones, where it ranks third among mobile news sources, trailing only CNN and Yahoo, according to M:Metrics.
“There remains a very strong residual mobile opportunity for ESPN,” Doug Mitchelson, a media industry analyst for Deutsche Bank Securities, wrote in a note to investors. “While the phone effort might have failed, the software developed to serve the sports fan through a mobile phone was very powerful, and a clear leader in the sports category.”
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Mobile ESPN plans to provide wireless service and content for its subscribers until the end of the year, refund the purchase price for handsets and assist customers with transferring their phone numbers to other carriers.
Roughly two-thirds of the slightly more 100 employees at Mobile ESPN will likely lose their jobs next year as the company transitions to a licensing business, though some may find other positions at ESPN, executives said.
Few of the new MVNO’s, including Disney Mobile, have been willing to disclose their subscriber numbers. Amp’d, whose backers include Qualcomm Corp. and Viacom Inc., recently announced that it is “rapidly approaching” 50,000 subscribers. Helio, a joint venture between EarthLink Inc. and Korea’s SK Telecom Co., has declined to quantify its customers so far.
Mitchelson downplayed the significance of ESPN’s decision regarding Disney Mobile.
“ESPN Mobile’s failure is not reflective of Disney Mobile progress,” he said. “At our recent management meeting, Disney noted that the Disney Mobile service got off to a better start than ESPN Mobile and that a fall marketing campaign will be underway to take advantage of the upcoming holiday season.”
Salil Mehta, executive vice president for ESPN Enterprises, said discussions with wireless operators to adapt the Mobile ESPN application for their cell phones have already begun, and that new offerings would likely emerge in less than a year, but that no deals were imminent.
“The focus of the ESPN organization is that we took a risk, but in doing so we have the benefit of having created the industry’s leading wireless application, and we’re going to figure out a way to bring that to fans and make the most amount of money,” he said.
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