ESPN's Mobile Trials

What happens when a TV network becomes a wireless service provider?

Hey, sports fans! Would you buy a cellphone from ESPN for $399? Apparently not. Since introducing its Mobile ESPN service in selected cities last October, ESPN has slashed the price of its signature handset by more than half, to just $99.

The price cut reflects just one of the lessons ESPN has learned in becoming a wireless service provider. The company is also contending with limited video rights and the challenge of recouping upwards of an estimated $100 million in startup costs.

When Mobile ESPN launched nationally in February, the handset cost $199. (Only 1% of all phones purchased in the U.S. cost more than that, says research firm Yankee Group.)

“They thought they could differentiate themselves as the ultra-premium product,” says mobile analyst Roger Entner, VP of Wireless Telecom at London-based research firm Ovum Research. “People apparently did not agree with it completely.”

“It's routine for there to be adjustments to prices,” says Manish Jha, senior VP/general manager, Mobile ESPN. “We felt it was an important thing for us to ensure that we're offering a competitive service.”

But while users may be more inclined to pay $99 for a phone that features one-click access to game clips, highlights and summaries, as well as a customizable scrolling ticker, they may be frustrated by the limited content. For instance, although Mobile ESPN offered programming around the 2006 NFL draft, it didn't secure the rights to stream the draft itself.

Moreover, phone users may be hesitant about having ESPN as their content and wireless provider. While other networks put TV content on phones, ESPN is a mobile virtual network operator (MVNO). Sprint provides network access to Mobile ESPN, but ESPN sends out the bills (monthly plans range from $34.99 for a basic 100-minute plan to $224.99 for 4,000 minutes) and answers the phone when subscribers call customer service.

MTV Networks has dipped a toe into MVNOs, investing $50 million in youth-targeted Amp'd Mobile, but ESPN is the only media brand to launch its own TV-network–based MVNO.

Given the expense of launching an MVNO, however, analysts wonder if they are little more than overly expensive branding ventures.

“They absolutely took a risk in cost on starting the venture,” says Entner, although there is the potential for high returns. Still, he adds, “there's a big difference between being a TV channel and being a service provider.”

ESPN won't give numbers for its mobile subscribers, but Jha says that the service is “off to a good start” and the company aims to break even or turn a profit with the lower price (although he won't give a target date).

“Our goal was not necessarily to accumulate as many subscribers as possible,” he says. “Our goal is to always have measured and controlled growth.”

Previously available only through ESPN and in Best Buy stores, the phone will be in some 500 Sprint stores by July and in 100 mall kiosks by year's end.

In June, Disney (ESPN's parent) will launch another MVNO, Disney Mobile. Starting price for two handset models: $59.99.

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