ESPN's recent decision to drop its privately branded wireless service in the US market underscores the pitfalls of the MVNO model in the North American market. It also has a special lesson for Mobile ESPN: Follow the business model used in Asia.
In the US, ESPN launched its mobile service as an exclusive, premium-priced offering that provided video highlights, updated sports scores and statistics. Disney, the parent company of ESPN, expected to gain 3 million customers by marketing the service under the ESPN brand. Some analysts said the service actually gained only about 30,000 subscribers and that Disney dropped an estimated $25 million on it.
Initially, ESPN charged consumers an upfront price of $499 just to subscribe. But even was this was scrapped, ESPN found that most US consumers preferred much less expensive mobile service branded by one of the four major US carriers. The ESPN brand is strong, but nor strong enough to cause consumers to switch carriers, especially when wireless service around the world has become a commodity. Everyone seemed to realize that fact except Disney executives.
Now ESPN officials in the US say they plan to license the content to various wireless carriers to potentially reach millions of users.
Essentially, that is the model ESPN already has utilized with great success in the Asian market. Jamie Davis, managing director of ESPN Star Sports in Singapore, outlined the Asian strategy for a group of journalists, including me, a few months ago.
"We're undergoing a migration from a telecom company to an original content company using any pipeline that's desired," Davis explained. "We deal primarily with the operators." He added that the sports content was differentiated between television sets and wireless phones and available on more than 400 different handsets. Some of the carriers paid ESPN Star Sports a fixed fee for the content and charged subscribers an extra fee to access it; other carriers paid his company a percentage fee based on the number of subscribers.
Davis made clear at the time that commercial success depended on making timely wireless sports content available to as many mobile users as possible and relying on the service providers to market it. That's precisely the opposite approach used in the US.
Of course, Davis' efforts are aided by different market conditions. For one thing, in Asia many of the carriers provide both television service and wireless services in specific countries, which makes his marketing task easier. For another, ESPN Star Sports in Asia is actually a partnership between ESPN Inc. and STAR Sports, which means the fierce rivalry that exists in the US between parent companies Disney and Fox Sports is missing. (Asia is probably the only place in the world these two companies peacefully co-exist.)
Nevertheless, ESPN's experience in Asia is markedly different that it is in the US, and if the company is to recover from its wireless debacle here, it will do so by providing content, not separate wireless service, to a mass consumer audience.
(Al Senia is editor of America's Network and based in Los Angeles)