ESPN is shuttering its money losing cellular service Mobile ESPN just a year after first introducing it, choosing to be a content provider to other services instead of operating one its own. Despite having slashed prices and offering its handset in more stores, ESPN was not amassing near the amount of subscribers it expected for the sports fan-targeting service.
Mobile ESPN handsets and plans will no longer be sold and current customers will stop receiving voice and data services after December 31, 2006. Customers who bought Mobile ESPN handsets will get a full refund of the purchase price when they settle their final bills, and ESPN will help them transfer numbers to other carriers. About two-thirds of Mobile ESPN's some 100 employees will lose their jobs over the next year, according to the company.
ESPN faced several struggles in becoming a wireless service provider, namely recouping roughly $150 million in startup costs, contending with limited video rights and learning how to be a cellular provider. Parent company Disney was expected to lose $135 million on the Mobile ESPN venture in fiscal year 2006, according to a report issued this summer by Merrill Lynch.
ESPN introduced its mobile service, which offers subscribers one-click access to game clips, highlights and summaries, as well as a customizable scrolling ticker in selected cities last October, selling the phone for $399. The service launched nationally in February at the Super Bowl with the handset going for $199. But finding that was still high, ESPN cut the price to just $99.
The venture was one of the most watched mobile virtual network operators, or MVNOs. Sprint provides Mobile ESPN's network access, while ESPN sends out bills and operates customer service lines. One possible future scenario for Mobile ESPN would have seen Sprint taking over the operating responsibilities from ESPN, but ESPN has chosen to end the service altogether, licensing content to bigger providers.
Mobile ESPN has "been approached by well-entrenched carriers about a licensing model," said Salil Mehta, executive vice president, ESPN Enterprises, in a statement. "We have decided to pursue it."
Investors have been lukewarm on embracing MVNOs, although the two major MVNOs in the U.S. - Amp'd Mobile (in which MTV Networks has invested $50 million) and Helio have reported good numbers lately. In July, a Merrill Lynch research note urged Disney to scrap Mobile ESPN, estimating the service would amass 30,000 subscribers this financial year, a fraction of their original 240,000 subscriber estimate.
In June, ESPN started selling the phone in 575 Sprint stores, hoping the expanded reach would help gain traction. Previously, the phone was available only through Best Buy and ESPN. As recently as last month, the service was adding new content, announcing in August it would offer up to 25 live broadcasts of college football.