Thursday, July 20, 2006

Merill Lynch: Time to Pull Plug on Mobile ESPN

MediaWeek reports that "Merrill Lynch issued a note to investors calling for ESPN to "throw in the towel" on its branded mobile phone service."

Jessica Reif Cohen and Michael Kopelman at Merill Lynch wrote that "it is time for Disney to pull the plug on Mobile ESPN." The pair charged that "since Disney launched the service with much fanfare during Super Bowl XL, the company has had little luck landing paying subscribers."

Regarding the initial $399 pricing for a Sanyo handset and the subsequent reductions in price, Merrill Lynch stated “the model does not appear to be a particularly attractive use of capital."

Cohen and Kopelman estimated that "ESPN Mobile will lure a mere 30,000 subscribers over the course of this financial year, well below their original estimate of 240,000. Along with the losses generated by a second Disney-branded phone service, ML expects that the Mouse will lose $135 million on its experiment in FY06."