The big mouse is finally loose in the wireless house as the Walt Disney Co. announced plans to launch a family-oriented mobile virtual network operator wireless service using Sprint Corp.’s nationwide network. The decision has been expected for some time and follows a similar announcement made last year by its ESPN division to launch a sport-oriented MVNO.
The Walt Disney Internet Group, which will oversee the newly formed Disney Mobile service, said it plans to offer wireless voice services, exclusive handsets and a package of features, applications and entertainment content targeting families when it launches service next year. WDIG also said it plans to tap into Sprint’s CDMA2000 1x EV-DO high-speed wireless data capabilities, which the carrier began rolling out last week.
“Disney Mobile will combine Disney’s heritage of quality and unparalleled brand equity in a family market with Sprint’s leadership in wireless voice and data services to create an engaging and easy-to-use mobile experience,” said Steve Wadsworth, president of WDIG. “This enhanced mobile service offering will ensure Disney’s place as a leader in the family mobile market, one of the fastest-growing segments of the mobile industry. We’ll be in investment mode for the next several years, but expect that over the long run this initiative will generate solid financial returns for the company.”
Disney said it will be responsible for all aspects of the service, including product development, distribution, marketing, customer relations, billing and other business operations. Partnerships to support those services are expected to be announced leading up to the service launch.
Disney Mobile will be led by George Grobar, senior vice president and general manager, who will report directly to Wadsworth. Grobar recently served as VP and GM of Disney Auctions. WDIG also named Rod Egdorf vice president and chief marketing officer and Sunir Kochar vice president of product development and operations.
Grobar said it was too early to discuss specific marketing and service offerings, but noted that the company would target Disney’s core audience.
“We will target both parents and kids,” Grobar said. “We have a strong brand and a large affinity customer base that we hope will see the value in what we can offer in the wireless space.”
Grobar hinted those plans would likely entail a family-plan type of offering that is becoming an increasingly popular way for carriers to attract younger customers and reduce churn. Analysts have noted that up to half of all new postpaid customer additions during the past several quarters have come through family-plan offerings.
Grobar added that the MVNO plans would not impact Disney’s content distribution deals around the world, but noted that Disney Mobile would provide exclusive content not available through third-party channels.
“We obviously are looking forward to utilizing Sprint’s network to provide content and services that consumers have come to expect from Disney,” Grobar said.
ESPN Mobile, which is expected to launch service later this year, also mentioned plans to offer content and services that would take advantage of Sprint’s evolving network.
Analysts were bullish on the announcement, noting the Disney name brings further marketing opportunities for the wireless industry.
“This is big news in the wireless world because Disney is not a telecommunications company,” said independent telecom industry analyst Jeff Kagan. “This represents a new area for the wireless industry to evolve into. Disney is a consumer company with tens of millions of potential customers just waiting to be marketed to.”
Others noted the deal further solidifies the MVNO business model of offering wireless services to a specific market segment.
“The Disney Mobile announcement is consistent with our view that future MVNOs will be very focused on targeting specific market segments and not going after the mass market like traditional wireless carriers,” said Patrick Zerbib, vice president of Adventis Corp.’s wireless practice.
Zerbib added that Disney’s move into the wireless space should send a signal to other consumer-oriented companies that the wireless industry is worthy of their investment, though the market’s ability to support large MVNOs is limited.
“This sends a message to others thinking if they want to enter the MVNO space that the window is beginning to close,” Zerbib said.
While Disney was sparse on the MVNO details, the deal should prove lucrative for Sprint, which has been the most aggressive wireless operator in targeting MVNO partners. The carrier already serves nearly 4 million MVNO customers on its network-with most coming from its Virgin Mobile USA L.L.C. joint venture.
Analysts have noted that Sprint’s MVNO partners provide the carrier with incremental revenue through the minutes they buy on the network without Sprint having to shell out any money in acquiring or maintaining those customers. Sprint posted $359 million in MVNO revenues last year and said it expects to report between $575 million and $675 million in MVNO revenues this year.
Sprint’s MVNO success has attracted many of its rivals to become more active in the MVNO space. Verizon Wireless has announced several MVNO agreements this year, including a youth-oriented deal with Amp’d Mobile Inc., while Cingular Wireless L.L.C. has already launched an MVNO service with 7-Eleven and is looking at launching a business-centric offering with AT&T Corp., which is being acquired by Cingular parent company SBC Communications Inc.
The Yankee Group recently predicted that MVNOs will serve more than 29 million wireless subscribers by the end of 2010, or roughly 14 percent of all wireless customers.
“Service providers should exploit this boom in MVNOs as a means to capture subscribers in niche market segments without diluting the overall brand image and core marketing message,” said Marina Amoroso, wireless industry analyst at the Yankee Group. “Differentiation though MVNOs will help carriers sustain their long-term viability by avoiding the downward spiral of price wars, while simultaneously growing their subscriber base with previously untapped market segments.”
