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Disney: The New MVNO
Targeting Families Makes Sense, but Disney Faces a Crowded Field

Disney Mobile’s recent launch as a Mobile Virtual Network Operator (MVNO) has brought a renewed focus on marketing wireless voice and data services to families.

Data from The NPD Group supports that this is a good market for Disney to go after, but it is also full of very strong competitors. And, not coincidentally, some of these competitors have come out with new products precisely timed to steal some of Disney’s thunder.

It’s too early to tell if Disney Mobile will be a hit, but looking at the market size and related trends, we can make some educated guesses.

Controlling the Kids

Here is a brief outline of what Disney offers beyond traditional shared family voice minutes:

Locating a child’s phone via GPS
Setting spending limits and tracking voice, messaging and content downloads
Determining hours of usage
Managing and restricting phone numbers
Prioritizing family messages

Pricing for Disney Mobile ranges from $60 to $250 per month. Similar family-focused offers have been announced recently by some of the leading carriers, including the following:

Chaperone from Verizon Wireless
Family Locator from Sprint
kidConnect from T-Mobile

So it’s clear that Disney has plenty of company.

What Drives the Family Frenzy?

What’s driving the family frenzy? According to NPD information it’s some pretty healthy growth potential. Among consumers with kids in the home who purchased a mobile phone within the past year, between 30 and 40 percent have teens (age 13 to 17). Some 20 to 30 percent have ’tweens (age 6 to 12) living at home. And roughly 20 percent live with both ’tweens and teens.

cool phone chart

Moreover, with the overall mobile phone penetration rate hovering around 70 percent, the penetration among teens is at 53 percent. The estimated untapped number of teens is approximately 15 million, so it’s clear that Disney has its sights set on these kids – and their families. At the same time they’re trying to lure away families from other carriers, too.

GPS Makes Sense

The capability that allows parents to know the physical location of their kids via mobile phone could be the first mainstream hit for Location Based Services (LBS). The location angle certainly makes sense – mainly from the parents’ perspective, of course. Nearly 30 percent of mobile phones now have some form of GPS capability, and carriers have been slowly rolling out LBS to take advantage of this technology.

Hurdles

Disney faces some significant hurdles. Among them are the following:

History: it has taken youth-focused and fellow MVNO Virgin Mobile nearly four years to reach four million subscribers
Recent MVNO history: Amp’d Mobile and the Disney-backed Mobile ESPN have both struggled to sign up customers
Resistance from parents unwilling to switch carriers
Resistance from parents unwilling to play phone cop, no matter how convenient
Resistance from kids unwilling to be identified with Disney as they grow older

Peer Pressure

Currently, the vast majority of seventh-graders have the same service their parents have – and that means from the major national carriers. Their handsets don’t have the Disney logo, and brand and model choices are much wider than Disney’s offerings; thus, if Johnny wants playground cred and his buddies are carrying RAZRs, there’s no way he’ll be whipping out his Disney Mobile handset. To his friends, it would have “Mamma’s Boy” written all over it.

Of course keeping track of your kids is a good thing, from a parent’s perspective. Maintaining control over what a kid can and can’t do is great for parents. Unfortunately, it’s a non-starter for most teens. That’s why Disney needs to come up with something of value for teens, too, or risk losing the very customers they are trying so hard to claim.

The Upside

Using past marketing history as a guide, if any company can corner the specific wireless needs of families with children, it’s Disney. But it won’t be easy. The company must be in this for the long haul, since it will take four to five years to establish a sizable and profitable customer base and create a new paradigm for families.

Competition will also be fierce from the other national carriers. These rivals will continue to watch every move Disney makes, and they’ll pounce with counter offers whenever possible.

Bottom line: Company officials better have on their marathon shoes, because this race is no leisurely stroll through the Magic Kingdom.

- Neil Strother, Research Director, Mobile Devices