September 27, 2007 12:30 PM PDT

Disney Mobile bites the dust

Posted by Marguerite Reardon

The Walt Disney Co. pulled the plug Thursday on its Disney Mobile phone service.

Disney said the service will no longer be available after December 31, but it might offer some of the specially designed software and applications through another wireless operator.

Disney came on the mobile scene about 18 months ago with a special phone service designed to disseminate its content and create a slew of applications designed for parents and families. Its Family Center allows parents to track their kids and limit how and when they can use their phones. It also allows parents to set spending limits on text messages and downloadable content.

Unlike major carriers like AT&T, Sprint Nextel or Verizon Wireless, Disney Mobile did not own its own network. It was a mobile virtual network operator or MVNO that leased capacity from another carrier (Sprint Nextel) and built a service around different applications.

Several companies have leveraged their brands in the mobile arena. Virgin Mobile is among the success stories. But there have also been several companies that have failed in this model. For example, Mobile ESPN, which was owned by the same parent company as Disney Mobile, discontinued its MVNO service last year after only about six months of offering the service. ESPN now offers its content and applications on Verizon Wireless' network.

Other MVNOs say they are doing just fine. Helio, the cellular phone company owned by Korean carrier SK Telecom and EarthLink, said it now has 140,000 subscribers, up 40 percent in the past 90 days. The company, which has a slew of "cool" phones targeted at young hipsters, also claims to have generated about $200 million in revenue in the first 15 months it has offered its service. And it claims to have one of the highest average revenue-per-user metrics, or ARPUs, in the industry, about $90 per customer.

Helio attributes its success to the fact that it has provided cutting-edge devices and services to its customers.

"Disney is not a mobile company, they are a media company, and this is an expected realization that being a mobile company never really made sense," said Rick Heineman, a spokesman for Helio. "Helio is a mobile company, not some other business, and our continued success is a reflection of this."

Heineman went on to say that the demise of Disney Mobile and other MVNOs like it helps "clear the field for healthy players like Helio to grow even faster with less clutter in retail channels and competition for shelf space."

"Fewer poorly conceived new competitors will be funded as people realize its not enough to sell off-the-shelf devices," he said. "True innovation and differentiators across the entire business model are necessary."