ESPN's Cell-Phone Fumble
In its 27-year history, ESPN has pushed its brand with the ferocity of a linebacker on steroids. And mostly it has emerged with big wins. But the sports entertainment giant recently admitted to a rare failure in brand extension. Just seven months after launching its own cell phone and service on Super Bowl Sunday, ESPN abruptly announced it was scrapping its heavily hyped Mobile ESPN.
Becoming your own cell-phone provider--leasing wireless spectrum from one of the big carriers and delivering programming directly to customers--is not for the faint of heart. Very few Big Media brands attempt to become an MVNO, or mobile virtual network operator. ESPN, the $5 billion-a-year jewel of Walt Disney Co. (DIS ), takes pride in knowing what sports fans like and how they want their games, highlights, and analyses served up. Yet despite investing nearly $150 million in Mobile ESPN, say industry sources, the company signed up just 30,000 subscribers, way below a possible breakeven mark of 500,000.
ESPN's decision to go it alone even though it already offers programming through Verizon, Sprint (S ), and the other wireless carriers is akin to Michael Jordan leaving his comfort zone to play baseball. In other words, there are lessons here.
NOT EVERYONE IS STEVE JOBS. ESPN thought it could get sports fans to pony up for an ESPN-branded phone and premium service by luring them with a cool device and marketing the heck out of it. But the black and red Sanyo phone was chunky and unremarkable. And the $40 million that ESPN pumped into witty ads did little to stoke the business. Besides thinking it could make a buck on hardware, ESPN figured it would save on the 50% or so share it typically would have had to give to wireless operators to run content on their networks. That savings was crucial since ESPN, as a secondary rights holder, still had to pay the leagues for clips.
SPORTS FANS HAVE OTHER LIVES. As passionate as sports nuts are, they have other interests and obligations. That was supposed to be the point. At Mobile ESPN's launch, the company said there were plenty of people out there willing to pay for the privilege of getting sports all the time, whether at the grocery store, the kid's soccer game, or waiting for the bus. But even a 19-year-old sports junkie has other avocations, even if they are just sex and beer. The point is people want to be able to access more than sports on a cell phone.
MAKE SURE YOU BLOW PEOPLE AWAY. Signing up for Mobile ESPN required a big leap of faith. Folks had to pay up to $199 for the phone and between $65 and $225 a month for premium content. Plus ESPN was asking many people to switch carriers and abandon family plans. Research firm Brandimensions reports that 60% of 1,900 consumers it surveyed were turned off by all these factors. If you're going to ask that much of people, they'd better feel they've died and gone to sports heaven. They didn't.
CUT YOUR LOSSES AND MOVE ON. To ESPN's credit, it didn't waste time when breaking even looked about as likely as making an 80-yard field goal. "We discovered [Mobile ESPN] was too limiting," says Salil Mehta, an executive vice-president of ESPN Enterprises. "We can take all the programming we developed and the new engineering in terms of presentation and put it in front of so many more consumers." So just as it did before Mobile ESPN came along, the network will license programming to the carriers but in new ways. Says Mehta: "Stay tuned."
ESPN has turned losers into winners before. Early attempts to get into print included short-lived inserts in Sunday newspapers. That failure led to a magazine with a circulation of nearly 2 million. ESPN2 played rock music and scrolled sports scores when it launched in 1993. Today, it is a fully programmed channel available in 90 million households. And if the company can sell ESPN Burgers and Sudden Death Brownies at its Zone restaurants, then maybe the second coming of ESPN's mobile strategy will find an audience, too.
Jon Fine is on vacation. For his blog on media and advertising, go to www.businessweek.com/innovate/FineOnMedia
By Tom Lowry