September 28, 2006
ESPN Pulls Plug on Cell Phone Operation
NEW YORK -- ESPN is closing down its cell phone company for sports fans after less than a year, planning instead to forge deals with other wireless operators to offer Mobile ESPN's multimedia content, the majority-owned subsidiary of Walt Disney Co. announced Thursday.
The company will continue providing 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, ESPN executives told The Associated Press.
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, the executives said.
The company has signed up only tens of thousands of subscribers since it launched the service in late 2005 and began advertising early this year, with commercial spots appearing regularly on ESPN's cable TV broadcasts.
Disney recently disclosed it has so far invested a combined $150 million in developing both Mobile ESPN and Disney Mobile, a cell service designed for families that is unaffected by Thursday's announcement. The company did not disclose Thursday if there would be any charge against earnings to reflect the closure of Mobile ESPN.
"There's certainly some disappointment," said Salil Mehta, executive vice president for ESPN Enterprises. "I think 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."
ESPN's decision marks the retreat of one of the highest-profile and most-heavily marketed efforts to create what's known as an "MVNO," short for mobile virtual network operator.
An MVNO puts its own brand on a wireless network operator's service, in this case Sprint, paying that company to connect calls and deliver content. 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.
Each MVNO attempts to cater to the specialized needs or interests of an audience they contend is underserved by mainstream cellular players such as Cingular Wireless and Verizon Wireless.
For Amp'd Mobile and Helio, it's the youth market. 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. Some researchers estimate that a virtual cell brand needs several hundred thousand subscribers to be financially viable, while others put the number in the millions.
For Mobile ESPN, of course, the target audience was that breed of sports fans who are willing to pay extra to get their favorite team's name on a license plate.
Mehta 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.