Startup wireless operator Amp'd Mobile filed for Chapter 11 bankruptcy late Friday, unable to meet payments due on almost $100 million of debt.
The company, which launched service in December of 2005, does not own its own network but instead rents airtime from that of Verizon Wireless to offer its service. Like other companies who do the same -- such as Helio and Virgin Mobile -- Amp'd's strategy is to offer a suite of mobile content and entertainment services targeted at a specific user group as a way to stand out in the hyper-competitive wireless arena.
While larger operators like Verizon offer services designed to appeal to a wide range of users, Amp'd focuses on the young-adult market with edgier video, games and music content-some of which it produces itself.
Amp'd stood out in the mobile music market as the first operator to offer mobile downloads for 99 cents a song. It also found success as a producer of original content, the highlight being an animated video series called Lil' Bush -- which Comedy Central has picked up to develop into a full-length show.
However the mobile entertainment market is a slow growing one. Despite the increasing numbers of multimedia-enabled mobile phones purchased, few subscribers use them to access mobile-delivered media.
Additionally, Amp'd does not have its own retail presence. It relies on consumer electronics retailers like Best Buy to distribute its product, whereas its competitors own their own retail outlets.
Analysts say operators like Amp'd need about 1 million subscribers to become self supporting. Until then, they rely on huge amounts of funding to remain in operation, with most of the money going to expensive marketing and customer acquisition costs. Amp'd has raised a total of $360 million in funding from such sources as MTV Networks and Universal Music Group.
To date, it has acquired just under 200,000 subscribers, almost half of which has come in the last 8 months. In a statement, Amp'd spun the bankruptcy filing as necessary due to its "rapid growth."
"As a result ... our back-end infrastructure was unable to keep up with customer demand," the statement reads. "We are taking this step as a necessary and responsible action to sustain and strengthen our momentum in the market place."
In the week prior to the bankruptcy filing, rumors swirled of an internal debate within Amp'd's investor-heavy board of directors over the company's strategy. Sources say some boardmembers wanted to quit selling services directly to consumers and focus instead on creating original mobile entertainment content for other operators.
Two board members reportedly resigned over the issue , and the future of founder/CEO Peter Adderton remains in question.
While Amp'd says it expects to emerge from bankruptcy quickly and continue to offer services throughout, the move is yet another black mark on the content-focused mobile virtual network strategy. Last year, fellow MVNO Disney Mobile abruptly ceased operations after tepid consumer response. The company now focuses on providing content to other operators.