Big brands go cellular

Video content will change throughout the day as stories develop, and highlights will be posted quickly when games are finished.

Sports fanatics may be pumped about getting "SportsCenter" on their cell phones, but they're not the only ones to score well-known brands via their handsets these days.

The new Mobile ESPN service is part of a growing trend in which big consumer companies extend their brands by providing phone service, largely in hopes of targeting a narrow market segment that the big phone carriers aren't reaching. ESPN Mobile, known in the mobile world as an MVNO or mobile virtual network operator, won't actually own cellular towers or the network itself. Instead it will buy air time over Sprint Nextel's wireless network.

"Our mission is to serve sports fans on any platform," said Manish Jha, senior vice president and general manager of Mobile ESPN. "What we realized a couple of years ago is that the cell phone industry is highly fragmented. Cell phone carriers are trying to reach 17 different groups of people, and the effectiveness of that is limited."

Analysts expect MVNOs to become a major force in the cellular industry, generating about $11 billion in service revenue by 2010, up from $1.9 billion last year, according to the Yankee Group. And while there are only about 14 million MVNO subscribers today in the U.S. out of a total of 200 million, the number is expected to grow to 29 million MVNO subscribers by 2010.

But experts agree that launching a cell phone service isn't the best strategy for every company.

"Not every Scotch or 3M needs its own branded cellular service," said Fedor Smith, director of strategy at telecommunications industry research firm Atlantic-ACM. "Companies need some sort of unique content or service, or even an established cool brand to make this work."

New cell phones and a faster cellular network that support music, graphics and video have created an environment that's perfect for content owners like ESPN to offer their own cellular service.

Virgin Wireless, which also uses Sprint's network, was one of the first major brands to launch its own cell phone service in the U.S. The U.K.-based media company targets the teenage audience that shops in its music stores and offers users a prepaid calling plan.

A slew of other brands have followed in Virgin's footsteps by announcing plans for their own cellular services. Disney Mobile, for example, plans to launch a service later this year targeting families.

EarthLink and SK Telecom, a telecommunications company based in Korea, have teamed up to launch a new service called Helio, geared toward teens. Helio rival Amp'd Mobile is also going after young hipsters. It runs on Verizon's network and has the Universal Music Group as one of its funders.

Retailers such as 7-Eleven and Circle K, meanwhile, have launched their own cell phone services, as well. And Target and Wal-Mart are considering offering a service. Service providers that don't have their own cellular networks are also good MVNO candidates. Last year, Sprint announced plans to work with Comcast and other cable companies to provide wireless phone service.

Walt Disney's ESPN first unveiled plans for the mobile service in 2004, announcing it would work with Sprint to develop it.

ESPN will start offering its mobile-service phones, made by Sanyo, at more than 700 Best Buy stores on Feb. 5. Pricing on the service plans ranges from $34.99 a month for 100 minutes of talk time to $224.99 for 4,000 minutes. There is no extra charge for the ESPN data service or other Web usage, regardless of the plan.

ESPN plans to continue offering its content through traditional cell phone operators such as Verizon's V Cast service and Sprint's consumer television service. But Jha said ESPN's decision to also have its own service that closely bundles its content was driven by a feeling that the company is underserved by the existing carriers.

"Verizon updates its content every six hours or so," Jha said. "That's too long for our sports fans who want updates constantly. It also takes 16 clicks to get to our content."

Several technology companies have sprung up in the last couple of years to make it even easier and more cost-effective for just about any company to launch their own cell phone business. Companies such as Visage Mobile, Convergys, Inphonic and Versent Mobile, a business unit of DBS, provide the billing systems, customer care platforms, activation processes and distribution channels for these new providers. They claim they can greatly reduce the time to market and upstart cost for brands wishing to enter the MVNO market.

But experts warn that many of the MVNOs springing up today may not survive for long. They say that even if companies don't have to spend money to build a new network like the traditional cell phone operators have done, it's still not an easy business to enter.

Aside from building the back-end technology to offer the service, there are several other costs to consider. For example, simply acquiring new customers can cost up to $400 per subscriber. Then there are the fees the MVNO must pay to the carrier for the use of its network.

"It's not for every brand," said Marina Amoroso, an analyst at the Yankee Group. "Aside from the cost issue, you also don't want to damage the brand you've built up. Nike may not want to shoulder the burden of a cell phone service that drops calls."