ESPN Official: Mobile Phone Service Failed Because Company Couldn’t Afford to Give Away Free Phones
When ESPN set out to dominate the mobile sports news business, company executives thought the best way to increase its earning potential and market share was to actually own the phone service.
They were wrong, said ESPN executive vice president of content John Skipper during a recent “Breakfast with a Leader” meeting sponsored by the Magazine Publishers Association.
“We want to be a leader in every platform, serving fans wherever they go,” he explained. “When we first started disseminating content on mobile devices, we thought our opportunity to make more money was to own the phone company. We were right hypothetically. If we had gotten people to subscribe to our service, we would have made a lot more money. But we didn’t.”
ESPN announced in late September that it had pulled the plug on its phone service after only eight months in the business. The move surprised many who thought ESPN’s well-known, brand name and big dollar ad campaign promoting the service would ultimately reap the company benefits.
ESPN officials thought that when the wireless local number portability act, which allows mobile phone users to keep their same phone numbers even if they switch phone companies, would encourage people to shop around for new carriers with better rates and services, Skipper said.
But the company’s plans underestimated the resilience of big-name phone companies, like Verizon, Sprint and T-Mobile. “We thought people would switch more but they actually switched less,” Skipper said. “Because the phone companies did such intense marketing, including giving away $300 phones, to keep their customers, less people are switching carriers now than before the portability act.”
ESPN, in launching its phone company, did not take into consideration the fact that phone companies would give away phones to both existing customers and new customers in order to thwart people’s efforts to change service providers, Skipper said. “Our financial plan did not contemplate having to give away $300 electronic devices,” he added. “So we folded. But we still believe we’ll be No. 1 in the mobile content arena. We just won’t be the ones providing the phone service.”