Those performing autopsies on Mobile ESPN will find plenty of causes of death. But mobile advertising revenues could have offered a lifeline to the doomed mobile virtual network operator.
Analysts agree that the sports network’s ambitious wireless effort failed on several fronts. The company offered only two handsets, and-like many of its competing MVNOs-never found a way to differentiate itself at the retail level. After launching with an online-only distribution model, the company’s inked a retail pact with Best Buy only to find its phones lost on the big-box retailer’s shelves of devices from its network partner, Sprint Nextel Corp. And the media giant did a poor job of contrasting its branded wireless service with its mobile Internet offerings, potentially creating confusion between wireless ESPN content and the MVNO itself.
“Mobile ESPN was a poorly executed concept from day one, based on the mistaken premise that ESPN content was strong enough to demand a premium from wireless consumers,” according to Eddie Hold, vice president of wireless service for Current Analysis. “Almost every facet of Mobile ESPN’s approach was flawed.”
ESPN Mobile’s largest hurdle, however, may have been the most addressable: pricing. The company launched with a lone, $400 phone, and service starting at $65 a month. While prices for both handsets and service were lowered as the offering flailed, analysts say the expensive prices may have doomed the MVNO from the start.
Not that the company was lining its pockets, of course: the MVNO business model is built on thin profit margins. Network partners charge a premium for data traffic-the lifeblood of many MVNOs-and expenses for necessary components such as customer care can be exorbitant. But such costs can be offset by the increasing revenues from mobile marketing, allowing service providers to deliver a host of data offerings at substantially decreased costs to the end user. While Mobile ESPN had begun to tap advertising dollars, the U.S. wireless market has yet to evolve to the point where those dollars impact monthly subscriber statements.
That is about to change, however. Sprint Nextel Corp. is teaming with Enpocket to sell inventory on its WAP pages to advertisers, and Verizon Wireless is working on a similar program. MVNOs, which are notably more agile than network operators, could have even more to gain, partnering with niche-specific brands in a targeted effort to attract specific demographics.
“Mobile marketing, I’d say, is in about 1996 in terms of the time frame compared to the Internet; but when it takes off in mobile, it will be faster,” said John Puterbaugh, chief executive officer of mobile media company Nellymoser Inc. “Conceptually, I think the carriers have had some successful trials. They’re going to dip their toes in” to wireless advertising.
And they’re likely to find a market: data from Compete Inc. suggests 65 percent of wireless users said they may be willing to accept mobile advertising in exchange for free or discounted services. While customers stayed away from Mobile ESPN’s pricey offering in droves, sports-crazy mobile users may be far more inclined to spend half as much for service in exchange for sitting through banner ads on the wireless Web or 15-second wireless video commercials.
Fan-ad-ics
“Sports fans exhibited greater willingness to accept mobile ads than the general population across all categories of incentives,” Compete’s Adam Guy and Becky Bitzenhofer wrote in a research note. “While this represents a lost opportunity for Mobile ESPN, carriers and MVNOs distributing sports and other entertainment content can leverage an advertising-supported model to fill in revenue gaps of consumer price sensitivity.”
ESPN, meanwhile, is hoping to salvage a licensed wireless business from the wreckage of its MVNO. The company-which spent $150 million on the failed wireless service-is talking to network operators and may find partners willing to sell ESPN-branded phones and services with the compelling user interface it built for its subscribers.
The network’s high-profile brand and coveted content could allow it to reap many of the benefits of an MVNO without paying much of the overhead, and the technology it helped build might actually position the company ahead of some of its competing content providers.
“These discussions can go in any direction; everything and anything is on the table,” said Manish Jha, general manager of Mobile ESPN. “We learned a lot from the MVNO experience… our goal now is to make that kind of content of content experience available more broadly.”
Regardless of how content providers come to market, though-whether through MVNOs, on-deck partnerships or as direct-to-consumer third parties-the entire industry has come to look at advertising revenues as a pillar of the business model. Analysts and industry insiders generally believe the mobile content industry eventually will resemble cable television, where users can choose from a variety of premium offerings on top of paying a flat monthly fee for basic service.
And just like cable TV, advertising dollars will be a crucial part of the business model.
“Even though people want to lament the death of an MVNO, I think, given the nascent mobile data and ad markets, (Mobile ESPN) wasn’t a good use of dollars to go to market using that type of private network,” Nellymoser’s Puterbaugh said. “I think the ESPN brand is still strong; people will pay a premium for it on top of their data plans, like cable. It used to be that cable was going to be ad-free, but now you’re paying a premium on top of (advertisements).”
