Disney's MVNO Failure: Wishing Upon a Star Not a Good Strategy

Last Updated Sep 28, 2007 1:00 PM EDT

mickey-mouse.jpgDisney's decision to shut down its MVNO has critics questioning whether any company can succeed using the business model. Mobile ESPN and Amp'd Mobile couldn't make it work, but Helio's holding strong (with the help of a lot of cash.)
Fortune offered some insight into the challenges in marketing an MVNO:
The problem that all three of these so-called Mobile Virtual Network Operators, or MVNOs, faced was pretty simple: they were trying to target very specific demographics (kids, sports fans, twentysomething music lovers) with the promise of exclusive content or applications. But, says IBB Consulting partner Shahid Khan, it turns out the applications weren' t unique."Amp'd had cool video content," he says, "but so does VCAST," Verizon (VZ) Wireless' video service. Only Verizon's economic model, in which it owns its own network and has millions of customers utilizing that network, is a lot more compelling than that of a company like Amp'd.
Oh Mickey what a pity you don't understand! Why didn't Disney learn from Mobile ESPN's failure? What made the mouse think a phone targeted to children would be any more successful than one for sports fans? True, the family control applications offered a unique value proposition (location monitoring, usage limits, spending limits). But if Disney did its homework, perhaps it would have anticipated the challenges in getting the phone into customers' hands.

One Information Week reader put it nicely:
The MVNO is decidedly a short-term "get rich quick scheme" strategy, sold by the telecom providers to entrepreneurs, venture capitalists and corporations when VCs were hot on "wireless." The design was to make wholesale revenues without losing long-term strategic business. With a break even well over 200,000 customers, the high marginal costs prove that the business is a suckers bet. In the case of Helio, they are wholesaling Sprint minutes. Good luck with building value. Churnrates must be Sky-Dayton-High.
(Mickey Mouse image by dbking)