Disney to hang up phone service aimed at families
It wasn’t the usual happy ending for a Disney project.
Walt Disney Co. said Thursday that it would end its Disney Mobile phone service at the end of the year, the second time in a year that the huge conglomerate has orchestrated a quick closing of a cellphone operation.
The service had been tailored to the communications needs of families and children, offering features designed to enable parents to stay in touch with their children and help youths learn to use cellphones responsibly.
The decision, coming a year after Disney suspended a similar niche offering, Mobile ESPN, illustrates the challenges of competing with national wireless carriers that own their networks. Disney, like many other so-called mobile virtual network operators, leased network capacity from one of the major carriers -- Sprint Nextel Corp., in Disney’s case.
“It’s a very expensive and formidable challenge, and it’s a losing proposition unless you can quickly get to scale,” said Mark Donovan, senior analyst with M:Metrics Inc., a Seattle-based mobile research firm.
Launched in June 2006, Disney Mobile enables parents to monitor their children’s phone usage or restrict the times of day or the days of the week when the phones would work -- eliminating potential abuse, such as children sending text messages to friends during class.
The phones also use a global positioning system that enables parents to track a child’s whereabouts.
“The stuff they were offering for families was right on target for what people want,” Jupiter Research analyst Julie Ask said.
Disney was counting on its brand name to attract customers, most of whom already had cellphones, but its added services were eclipsed by a rapidly changing market.
Major carriers, such as Verizon Wireless and even Sprint, stole its thunder by rolling out similar child-finder services and other family-friendly features.
“Some of the secret sauce of what Disney was trying to provide in a unique offering, some of the bigger carriers have also clued into,” said Charles S. Golvin, a wireless analyst for Forrester Research Inc.
Disney Mobile said it also struggled to get broad retail distribution of its phones. That left it relying heavily on the Internet to reach harried parents who didn’t invest a lot of time “hanging out on the Internet, looking for the cool new phone,” Donovan noted.
“Disney has a fantastic brand,” he said. “But if you’re not getting that brand in front of people walking in the mall, thinking about buying a cellular phone, or in big-box retailers, then you really are rolling a rock up a hill.”
Steve Wadsworth, president of Walt Disney Internet Group, acknowledged those obstacles. He said the giant wireless carriers, with their millions of subscribers, were tough to compete against in two key areas -- price and phone selection.
Wadsworth said Disney would have had to make a major investment to continue in the mobile business.
“Getting the right retail distribution, getting to scale, the rate plans we can offer, the customer support . . . that was going to take substantial investment to get to scale in order to make this great product available,” Wadsworth said. “That’s what drove our conclusion here.”
The service will continue through Dec. 31, and Disney has offered to reimburse subscribers who bought handsets, accessories and content through the company. A spokesman said the company had not determined how many of the 120 Disney employees who worked on the mobile service would lose their jobs.
Analysts said the failure of Disney Mobile showed that finding a niche market ignored by the major phone carriers could be challenging, even for a well-known brand trying to appeal to its own base of customers.
That’s one reason Virgin Mobile succeeded with a prepaid phone service that targeted customers shunned by major carriers as lacking creditworthiness, Golvin said.
Amp’d Mobile Inc. tried to win voracious media consumers by offering videos, music and games for cellphones, but it failed because those features weren’t compelling enough to attract a large number of customers, he said. Amp’d went bankrupt in June and was sold in August.
“There is one reason why people have mobile phones and mobile phone service: That is to be in touch with the people they care about,” Golvin said. “Everything after that -- downloading video and music -- is additional.”
Wadsworth said that, like Mobile ESPN, the Disney Mobile service might one day reappear as a service offered through the major carriers.
“We’re in conversations with carriers about that,” he said. “So we will pursue those conversations and try to put another model in place.”