• by Mark Walsh  @markfwal, September 29, 2006

ESPN is shutting down its sports-centric cell phone venture after less than a year, as the high-profile paid service failed to draw the droves of avid fans that were expected.

The company will end operations for Mobile ESPN by year's end, and will instead pursue licensing agreements with wireless carriers to offer its multimedia sports content to subscribers.

The demise of Mobile ESPN doesn't come as a complete surprise. Robert Iger, chief executive of ESPN parent Walt Disney Company, acknowledged in August that the mobile unit's results to date had been disappointing and promised changes. Iger said $150 million had been invested in ESPN Mobile to date.

Separately, Merrill Lynch analysts Jessica Reif Cohen and Michael Kopelman in July had called for Disney to pull the plug on ESPN Mobile which they expected to gain only 30,000 subscribers during the year, far below than their original estimate of 240,000. The service was launched with much fanfare during the Super Bowl, and was heavily promoted in TV spots on ESPN.

Earlier this year, the price of ESPN's handset from Sanyo was cut to $99 from $399 in an effort to lure more subscribers.

As a result of the company's shift to a focus on licensing, most of the more than 100 employees of Mobile ESPN are expected to lose their jobs next year.

Salil Mehta, executive vice president, ESPN Enterprises, said the company is already in talks with leading carriers about licensing Mobile ESPN. "What we've chosen to do is lower a pretty significant barrier to get Mobile ESPN, and take this great, immersive content experience to a much larger base of folks," he said.

Financial pressures kept Disney from giving the mobile service more than eight months to find its footing in the marketplace, said Marina Amoroso, a wireless analyst at research firm Yankee Group. "Disney didn't have that patience," she said--especially since Iger took over as CEO last March.

But Mehta disputed that the decision came from the top. "This was very much ESPN's decision," he said.

As a mobile virtual network operator, or MVNO, Mobile ESPN's shutdown also raises questions about the future of other ambitious new MVNOs such as Amp'd Mobile and Helio. Like Mobile ESPN, these well-funded ventures launched at the start of the year, and have struggled to attract large numbers of subscribers.

Amp'd, which has gotten $250 million in venture capital financing, recently announced that it had 50,000 subscribers and expected to add half as many again in the next month. Analysts say a key problem facing MVNOs is a lack of distribution in retail outlets. "You need highly biased salespeople who are focused on your particular service," said Eddie Hold, a wireless analyst at technology research firm Current Analysis.

The end of Mobile ESPN is also expected to make it tougher for new virtual operators to enter the field. "It's going to be a lot harder for new MVNOs to get financial backing," said Hold.