If the United States were like the rest of the world, this would be the ideal time to sell some of the specialty cell phone services that so far just seem to be eating investors’ money. It’s hard to imagine a better time than during the World Cup to get people to buy something like Mobile ESPN’s Total Sports Package (for “only” $24.99 per month) or at least the ESPN Text and Video Alerts (for just $6.99 per month).
But according to a recent Wall Street Journal article, such services are struggling – to say the least. What I do not understand is why investors thought these services – and the many others promising information or video to cell phones – would ever make back the money they invested.
According to The Wall Street Journal close to $2 billion has been or is being invested in cell phone services for people who want to do more than talk on the phone. For example, Qualcomm and Crown Castle International separately are trying to create an infrastructure to support live broadcast television on cell phones, investing well over $1 billion between them to get systems up and running.
Making back that investment is going to take a lot of people with too much money, very good eyesight and a strong hankering for “American Idol.” This assumes the systems don’t compete with each other: If they do compete, all bets are off. Disney is spending $150 million to launch Mobile ESPN and another cell phone service. After roughly four months, about 10,000 people have signed up for the Mobile ESPN packages. This is about the same number of subscribers the youth-oriented Amp’d Mobile got after five months and $250 million in investments.
Actually, I’m not sure I want video-on-cell-phone services to succeed. If you think talking on cell phones while driving is a safety risk, just imagine the issues that come up when drivers are watching “Desperate Housewives” up close enough to differentiate the characters on the small screen. I’m constantly amazed at the optimism of the Internet-boom investors in the face of all logic, and at their ability to toss money at a new generation of ideas for technology-related services that have no more chance of making it big than selling dog food over the Web did. Who in their right mind ever would think there are enough people wanting to add $30 or more per month to their phone bill for these types of services, to recoup their huge investments? The Journal reports only 1% of the 215 million cell phones in the United States are used regularly to watch videos. I expect information like that was available to Qualcomm before it decided to invest $800 million in its video network; maybe the company was blinded by the vision of El Dorado.
There’s another old story about a boy coming home and finding a pile of manure in his living room. He searches through it, optimistically figuring there must be a pony in there. I fully expect there is a pony in all this mobile media hype, but I expect it’s a small one. And that small pony might just be Internet data connectivity, which in Mobile ESPN costs $9.99 per month and gets you the whole Internet including hundreds of sites where you can get much more than just the sports headlines – that is, unless ESPN tries to block access to specific sites, in which case ESPN is lying when it says it offers wireless Internet.
Disclaimer: Harvard Business School has classes in marketing, but none on lying that I could find. In any case, the above are my own observations.
