ESPN Shifts Mobile Video Focus

ESPN recently ended its highly touted run as a mobile virtual network operator (MVNO)—a company that buys network capacity from a network operator to offer its own branded mobile subscriptions and value-added services—choosing instead to focus on a broader licensing model that frees up its content to be viewed by cellular subscribers on multiple mobile service providers.

Mobile ESPN, which launched in February 2006, achieved only slightly more than 10% of its 240,000-subscriber goal. The biggest issue, according to Mobile ESPN senior vice president Manish Jha, was consumer discomfort with having to shift from one cellular phone service provider to another just to view ESPN content.

"We were recognized in the marketplace for creating an innovative experience on the cell phone, and we’re proud of that," said Jha. "We learned a lot from operating as an MVNO for the past seven or eight months. And we came to the conclusion that it’s appropriate for someone other than ESPN to take the risk, because the rewards are just not sufficient."

When asked by a reporter in a recent SportsVideoGroup interview to clarify these comments, Jha explained that content—while an important driver in many delivery modes—is farther down the list when it comes to mobile handset purchasing decisions.

"Customers in the cellular marketplace, by and large, are making decisions based on handset prices or form factor," says Jha. "Content is just not a driver of the wireless service purchase for a significant portion of the population. It’s in the single digits."

Because ESPN was running its service as an MVNO, the company was tied to the service provider from which it was buying excess network capacity (Sprint) while at the same time essentially competing with Sprint, since Mobile ESPN subscribers were required to sign up for an ESPN rate plan rather than the traditional Sprint rate plan. Now that the service is set to end on December 31, ESPN appears set to offer subscribers two options: release from current contracts with no early termination penalties or special incentives to move to one or several service providers that ESPN is actively pursuing in its new licensing strategy.

ESPN’s licensing strategy, according to one senior executive, is the result of interest from other service providers and not necessarily dissatisfaction with its current partner, Sprint.

"We remain committed to serving fans in the wireless arena," said Salil Mehta, executive vice president of ESPN Enterprises, in a press release. "ESPN is now able to take advantage of market opportunities that simply did not exist with our content before we built the MVNO."

Some industry analysts are skeptical that limited subscriber numbers were the cause of ESPN’s shift. In another recent interview , Yankee group senior mobile analyst Marina Amoros noted that the service had only been on the market since February, too short a time to accurately assess market conditions. Amoros instead indicated that it was probably a corporate decision made some months ago.

"[Mobile ESPN] was only in the marketplace for seven months," says Amoros. "And this decision probably happened a couple of months ago. No one would give a service like this only three months to prove itself."

ESPN isn’t yet publicly discussing where it will be going next with the Mobile ESPN services. According to Jha, ESPN is talking "with the usual suspects" and expects to announce something "in weeks or months, not years." Several new multicast-enabled services, such as Modeo and MediaFlo, are apparently also being pursued, since they would offer the ability to multicast large sporting events, keeping the cost of content delivery down.

"Our MVNO effort created a tremendous wireless asset widely recognized for quality and innovation, and as a result we have been approached by well-entrenched carriers about a licensing model. We have decided to pursue it," said Mehta in the press release. "With a redefined approach we have a greater opportunity to reach millions of fans while achieving our strategic and financial goals.

The company also expects—whether it transitions to another exclusive provider or licenses to several service providers—that it will jettison more than two-thirds of the 100 jobs that the Mobile ESPN team currently has. Jha explains this partly as a shift away from having to handle all services in house to moving to services already provided by other carriers.

"There are lots and lots of complications in doing an MVNO," says Jha. "And while we solved many of them the fundamental question at the end of the day is ‘What business is ESPN in?’"

Customers who purchased Mobile ESPN phones on the day of the announcement (September 28) will receive a full refund of their purchase price upon settlement of their final Mobile ESPN bill.