Lifestyle MVNOs: More Bust Than Boom

When the acronym MVNO was first explained to me several years ago, I was skeptical that such a business model could work over the long haul.

I grant that there’s a certain plausibility to the concept of lifestyle-oriented mobile virtual network operators. Still, practice often diverges from theory, and the devil, as the saying goes, is in the details.

The MVNO game, to my mind, seemed like a pure reseller arrangement, whereby a lifestyle company — Virgin, MTV, or ESPN, for instance — slaps its brand on an existing wireless-operator’s services, leveraging its network infrastructure, while defraying the mobile carrier of operational costs relating to billing, marketing, sales, and support.

I can see the appeal for the wireless operators, which often do not have the marketing acumen to address relatively untapped demographic market segments, but I wondered how much control or game-changing value the MVNO could realistically deliver to differentiate its service from the wireless operator, which — at the end of the day — still overwhelmingly controls much of what subscribers will experience. 

In the case of Mobile ESPN, which functioned as a wholesaler for Sprint Nextel Corp., the MVNO model apparently did not deliver the goods. Launched earlier this year, Mobile ESPN will fold its tent and close shop at the end of this year.

ESPN’s parent company, Walt Disney & Co.,  had been under mounting pressure to pull the plug on its sports-oriented MVNO operation, which an analyst at Merrill Lynch claimed would lose $80 million and attract just 30,000 subscribers by the end of his year.

I understand that the failed ESPN MVNO experiment is just one data point, but I haven’t seen compelling evidence to suggest that the MVNO model serves the interests of the brand that resells the services as much as it does the interests of wireless operators.

As a rule, there are more productive ways, offering more compelling ROI, to enhance an established lifestyle brand than entering the MVNO space.

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