Network Computing is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

Air Time: Mobile ESPN: A Blowout Loss

The idea seemed compelling. ESPN as a brand dwarfs all other providers
of sports content, in both scope and breath. With the emergence of broadband
cellular networks and smartphones, the delivery of rich content to sports
nuts had become a viable possibility. Virgin Mobile had achieved significant
success as an early MVNO (Mobile Virtual Network Operator), buying cellular
capacity at wholesale prices and reselling it at retail to consumers. However,
after making a big splash with a well-publicized Super Bowl launch last February,
Mobile ESPN attracted far fewer subscribers than expected. Imagine if the first
Super Bowl was held in an 80,000-seat stadium and only 10,000 fans showed up. It
might have been one and done for that idea as well. That was the scenario facing
managers at ESPN Mobile. In July, Merrill Lynch analysts recommended that the
plug be pulled. Last week, Mobile ESPN subscribers were informed that they had
until the end of the year to find a new provider.

This one hit home. For his 20th birthday earlier this year, I bought my
sports-nut son a new Sanyo phone offered by Mobile ESPN. Buying time with
month-to-month service from T-Mobile after the expiration of his service contract,
he was ready for something new to replace his aging Sidekick II. He explored all
the options, including devices and service providers, and settled on what looked
to be a very good deal for Mobile ESPN. It could have been worse. At least Mobile
ESPN will refund the purchase price of the phone. He switched to Verizon and
spent $200 for a Motorola Q.

As the dust settles, there's an opportunity for reflection, about Mobile ESPN
and the MVNO market as a whole. Although numerous factors conspired against
Mobile ESPN, four stand out. First, despite significant technical progress and
a ton of hype, cellular networks and the devices used to access these networks
aren't yet ready for video content. Riding atop Sprint's EV-DO network, Mobile
ESPN leveraged state-of-the-art wireless technology, but it still wasn't good
enough to provide a compelling user experience. Further, the Sanyo Mobile ESPN
phone is a nice device, but the screen is simply too small to deliver
sports-oriented content.

A second factor relates to consumer purchasing patterns. First and foremost,
consumers signing up for a mobile services contract are looking for reliable
voice service. Second, they want service at a predictable and reasonable price.
Sure, all the bells and whistles are nice, but basic voice service is still
king. The major carriers all know that. It's the reason Verizon blankets the
airwaves with clever commercials touting the superiority of their network.
Cingular does the same, promising more bars than anyone else, a simple message
that most consumers understand. Never mind the reality of dropped calls and
increasingly frequent service outages. Most people have come to accept these
problems as inevitable--glitches that affect all carriers.

The third factor, common to all MVNO's, is the increasing difficulty in
attracting new customers to cellular networks. Value-priced MVNO's have
been effective in using price as a draw to sign up new customers, but market
saturation is clearly in sight. And once a carrier has a customer, it really
needs to screw up badly to lose that user. Despite the obvious benefits of
number portability, churn rates are down across the industry, save for Sprint,
which has struggled to hang onto Nextel customers, many of whom blame Sprint
for the slow demise of their network. The bottom line is that it isn't easy to
switch wireless carriers. Most phones can't be ported between networks and the
increasing complexity of today's phones means that you're probably in for a
fairly steep learning curve once you switch, even if it's a phone from the
same manufacturer. As luck would have it, that's almost never your first choice.