Slow Start for ESPN's Mobile Offering

High Price for Service, Phone Cited for $25 Million Loss

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SAN FRANCISCO ( -- After launching a massive ad campaign, including buying valuable airtime on the Super Bowl, Walt Disney Co.'s Mobile ESPN has so far lost $25 million.
Prices have gone down for ESPN Mobile's phone and service in an effort to attract sports fans.
Prices have gone down for ESPN Mobile's phone and service in an effort to attract sports fans.

"Initial results were a little bit lower than we had hoped," admitted Disney President-CEO Robert Iger in an analyst meeting May 9. "But we have changed our pricing approach, we have strengthened and redirected our marketing, we're expanding our presence at retail," he said. "It is clear the jury is still out."

$30 million campaign
Mobile ESPN was tested last fall and was backed by an estimated $30 million campaign beginning with a kickoff spot from Havas' Arnold, Boston. The commercial shows a man blissfully unaware of the dream world he inhabits where athletes of every stripe and sport walk the streets as he watches his Mobile ESPN phone.

A Disney spokesman referred calls to Mobile ESPN, which has declined to specify the number of subscribers it has.

In early tests, the cost of a Mobile ESPN phone was $399, but that was dropped to $199 for a 2005 holiday special. Currently, the price is about $99 for the phone. Monthly subscriber fees also have been adjusted. Initially, monthly rates were $65 for 450 minutes of talk time and unlimited sports coverage. Some plans are as high as $224 a month for 4,000 minutes.

The service recently has been priced at $34.99 a month for 100 voice minutes in an attempt to get sports fans to buy the phone as a second phone and not as the primary wireless service they use for talk.

Expanded retail sales
Retail sales also have been expanded to include Best Buy and about 500 Sprint stores. Sprint is selling the wireless services that allow Mobile ESPN to operate. "We're really blazing new trails," ESPN Mobile spokeswoman Rebecca Gertsmark said. "We're really optimistic."

Disney executives during the conference call said they plan to invest $130 million in its two mobile phone ventures, Mobile ESPN and Disney Mobile, which will be launched this summer. Disney Mobile offers parents a number of custom features intended to help them manage their families, such as the ability to track the location of a child's phone to ascertain whether he or she has made it to after-school activities.

Disney Senior Exec VP-Chief Financial Officer Thomas Staggs said of the new offering: "We are hopeful for its success. But you should expect that those initiatives continue apace and we are continuing to watch them and we will keep an eye on them as they go."

Positive word of mouth
Wireless analyst Roger Entner of Ovum said Mobile ESPN is ramping up slowly because initial high prices discouraged new subscribers. Positive word of mouth about the service, however, will help once prices drop.

"If they keep them [prices] as high as now, they will certainly fail," he said. Mr. Entner noted that the $25 million loss would be considered "normal" by carrier standards. "I would rather expect that to increase with more customers coming on board, but to swing into profitability" within two to three years, he added.
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