SBJ/February 27 - March 5, 2006/This Weeks News

ESPN tries to bolster mobile unit

ESPN executives are planning to change elements of Mobile ESPN’s marketing and content after a bumpy beginning to the network’s high-dollar wireless venture.

ESPN has dropped the price of its phones
and started offering a low-end service plan.
Those plans call for an end to the “walled garden” content restrictions that prevent users from directly accessing Web sites not approved by ESPN, including the major competitive sports sites. ESPN also has a new round of advertising creative set to debut in April that will seek to better distinguish Mobile ESPN in the marketplace and tout the value of the wireless product.

Mobile ESPN officially launched on Super Bowl Sunday.

“We feel very strongly about the content we’re offering, so it’s really now a sales and marketing issue,” ESPN President George Bodenheimer said of Mobile ESPN, which resells network capacity leased from Sprint. “We’re happy with the progress to date and remain bullish, but this is still a work in progress. No new business runs on automatic pilot.”

Already, the price of the phone has dropped to $199 from $399, and a new, low-end service plan of $34.99 per month is being offered, down from $64.99.

The service is being sold through ESPN.com and Best Buy stores.

Although Mobile ESPN has garnered consistently high marks for its bevy of content, essentially providing a wireless form of ESPN.com, initial market reaction did not match the significant hype pumped out by the network. The service has drawn steady criticism for its relatively high prices and questionable mainstream appeal. On top of that were complaints about ESPN creating the list of non-approved Web sites.

ESPN executives said they are trying to avoid technical corruption from software downloads from non-approved sites.

Merrill Lynch analyst Jessica Reif Cohen projected $550 million in startup red ink on the venture and said that it “does not appear to be a particularly attractive use of capital.” Cohen does not see Mobile ESPN becoming profitable until 2010.

It’s a view not entirely challenged by ESPN executives.

“The financial model on this is not finished. We don’t know exactly how this will all play out,” said John Skipper, ESPN executive vice president. “We’ve obviously spent a lot of time studying this, and we certainly believe we can get market share continuing to do what we’re doing and delivering that high level of content. But what the market is going to precisely look like, we just don’t know.”

ESPN expects to exceed 250,000 subscribers for Mobile ESPN by the end of 2006, industry sources said, a sum slightly more aggressive than the outlook through much of the analyst community.

“It’s going to be onesies and twosies for them for quite a while in terms of market share,” said Seamus McAteer, senior analyst for M:Metrics, which measures mobile consumption trends and includes ESPN among its clients. “Even if they get to 5 percent share for their target audience of men 18 to 45, which would be really great, that gets them 30,000 or so new [U.S.] subscribers per month. The churn rates among this demo group are just so small, like 1 to 1.5 percent, and the competition is so intense. Getting to that 250,000 or so subscriber level is probably going to take more like 18 to 24 months.”

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