Well, Merrill Lynch has spelled out what others have been hinting at for some time: "It is time for Disney to pull the plug on Mobile ESPN." Even though the analysts implied that dropping the price of the Sanyo handset from $399 to $99 may get a few more subscribers onboard, "the model does not appear to be a particularly attractive use of capital" since the reseller business has tight margins and low ROI. ML predicts the MVNO will scoop up a mere 30,000, compared with the company's goal of 240,000 by year-end. The analysts also say that Disney is likely to lose a combined $135 million on its two MVNOs: Mobile ESPN and Disney Mobile. Disney CEO Bob Iger said in May that "it is clear that the jury is still out" on the future of the MVNO, but since then Mobile ESPN had revamped its pricing and marketing approach.
While it still is early days for media-branded MVNOs, it's obvious their day of reckoning is near and analysts like those at ML are looking to get the first nail in the coffin. If ML's numbers are correct, and I have no reason to doubt them, Disney must be looking at exit strategies. I just got off the phone with the folks over at Nellymoser and they contend a branded media MVNO like ESPN's may offer compelling content in one particular area, but the real pull comes from offering options: In other words, there are many sports fanatics, but very few fans watch sports and only sports.
For more on Merrill Lynch's Mobile ESPN thoughts:
- read this article [1] from MediaWeek
Links:
[1] http://www.mediaweek.com/mw/search/article_display.jsp?vnu_content_id=1002876073