Mobile ESPN Shuts Down After Less Than a Year

Wireless Service to Continue Under Licensing Agreements

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SAN FRANCISCO ( -- After less than a year in the marketplace, ESPN has pulled the plug on its mobile-phone endeavor.
ESPN's wireless service suffered through months of rate adjustments.
ESPN's wireless service suffered through months of rate adjustments.

Mobile ESPN kicked off last holiday season and was supported by an elaborate Super Bowl spot, but was plagued by months of adjusting rate plans and losses of at least $25 million.

'A greater opportunity'
Walt Disney Co. is discontinuing its service and focusing on licensing its Mobile ESPN software application to other carriers so that many features of the service will become available on more phones. Salil Mehta, exec VP, ESPN Enterprises, in a statement said licensing arrangements will provide a "greater opportunity to reach millions of fans while achieving our strategic and financial goals."

Mobile ESPN is technically an MVNO, or mobile virtual network operator -- that is, a wireless plan which uses the network of another carrier, in this case Sprint Nextel, to carry its service. Mobile ESPN, like other MVNOs, handled its own marketing, customer service and distribution. Havas' Arnold, Boston, is Mobile ESPN's agency.

Analysts did not immediately declare the failure of one of the most high-profile MVNOs a death knell for the entire proposition. "Mobile ESPN was ahead of its time," said Marina Amoroso, analyst, Yankee Group. Disney, in fact, is continuing with its Disney Mobile service, which is intended for families.

Gamblers and bookies
Other industry executives believe that Mobile ESPN appealed mostly, perhaps, to gamblers and bookies who needed the depth of sports information provided by the service. Even the most ardent sports fans, they argued, would be comfortable with standard Cingular or Verizon Wireless service, which provides sports scores as well as information about news and weather.

The shutdown of Mobile ESPN was not completely unexpected. Robert A. Iger, Disney's president-CEO, in an August third-quarter conference call with analysts, talked about the modifications ESPN made in the service and admitted that "while we are pleased with the quality and utility of this mobile content service, sales have been slower to develop than we had hoped."

At the time, Mr. Iger seemed to foreshadow today's decision to move into licensing. "We think there is a great opportunity to extend ESPN branded content to mobile platforms as a way of connecting with our consumers whenever and wherever they are. Over the long-term, we will continue to exploit multiple business models in the mobile space to drive revenue and affinity among our core users." He had previously stated that Mobile ESPN lost $25 million.

Growing MVNO crowd
Ms. Amoroso said about 14 million of the nation's 220 million mobile-phone subscribers are customers of MVNOs, with Virgin Mobile among the largest with 4 million subscribers. Other MVNO strongholds include pre-paid services with low international rates, which cater to immigrants wanting to keep in touch with friends and relatives outside the U.S. TracFone Wireless, a subsidiary of Latin American phone company America Movil, a big seller at Wal-Mart Stores, has 7.5 million subscribers, Ms. Amoroso said. This month, Red Pocket Mobile launched and targets individuals who speak Chinese.

The remaining high-profile MVNOs have less than 500,000 subscriptions, she said. They include Helio, a joint venture of Earthlink and South Korean telecommunications giant SK Telecom; and Amp'd Mobile, an entertainment-based program backed by Universal Music Group and MTV. Amp'd has said its subscriber base is approaching 50,000, while Helio has not announced how many subscribers it has.

Mobile ESPN did not announce its subscriber number, but analysts have estimated it to be in the tens of thousands -- a far cry from the quarter million initially anticipated.

Jeff Kagan, an independent wireless analyst, was surprised ESPN was unable to connect with its customers over its branded wireless-phone service. He was unwilling "to say there's anything wrong with the [MVNO] model. But clearly it takes more than a logo on a phone."

'Double-edged sword'
Ms. Amoroso said the fall of Mobile ESPN is a "double-edged sword," on the one hand having the potential to reduce the number of MVNOs entering the marketplace, but on the other showing that some parent companies don't have the "stomach" to hang in until subscribers reach profitable levels. She said that the fate of Amp'd and Helio will become clearer as early as March or April of next year when holiday phone sales are tallied.

Yet, the closing of Mobile ESPN seems officially to have doused the industry's euphoria over MNVOs when major marketers were thought to be likely entities to offer their own branded telephone service.

That euphoria peaked at the March 2005 CTIA conference when music artist P. Diddy declared: "I am an MVNO." Since then, major marketers have yet to step into the wireless business -- and P. Diddy has yet to start his own branded phone service.
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