What The NFL's New Partnership With Twitter Means To Investors

| About: Twitter, Inc. (TWTR)

Summary

The NFL has awarded streaming rights of the “Thursday Night Football” games to Twitter.

The deal is reported to be under $10 million which is a steal in comparison to other licensing deals.

Twitter not only gets to stream the games but gets a piece of the ad revenue, which makes the package extra valuable to the company.

Twitter is a smart strategic partner for the NFL because of its global reach, which likely also played a role in the league's final decision.

The NFL has joined Twitter (NYSE:TWTR)… again.

While the league, its teams and players are already very familiar with the social media site (in some cases for better or worse), the NFL this week took their relationship to a new level and it has investors wondering what it all means.

Earlier this year, the NFL awarded rights to its "Thursday Night Football" slate to CBS (NYSE:CBS) and NBC (NASDAQ:CMCSA) in a joint deal. Unlike the previous two seasons, the games would now be split across the two networks while (of course) being simulcast on the NFL Network. Following that move, the question became would the NFL try to cash in on streaming rights?

I think nobody was really surprised by the answer.

It was always more of a "how much" situation than a "if" as last year the league granted Yahoo (NASDAQ:YHOO) the rights to stream a single game for somewhere in the $17 million to $20 million range. The idea was to test the waters and see both the volume of traffic and strength of signal.

The initial test was seen as a success and speculation rose the Thursday Night games would be the next batch of games to further the experiment. The surprise though was who won the rights and the purported price tag.

With a reported $10 million (or less) bid, the winner was Twitter. That essentially nets out to $1 million for each of the 10 games. Brian Rolapp, the NFL's EVP of Media, later released a statement essentially echoing what everyone was likely thinking.

We did not take the highest bidder on the table. The platform is built around live events already. We want to see how they use the unique platform, and syndicated tweets all over the Internet is going to be interesting."

With Yahoo, Amazon (NASDAQ:AMZN), Verizon (NYSE:VZ), Facebook (NASDAQ:FB) and others reportedly in the mix, you can only imagine what those higher bids were, but you can also understand why the NFL made this decision.

Twitter was one of the originators of the social media craze and it still boasts a dedicated user-base despite having lost a little luster in recent months. Moreover, Twitter presents the NFL with another foothold in the international marketplace that it so desperately wants to be a part of.

For Twitter's investors, this is a complete win. Not only does the service get the games but it gets a limited amount of commercial space to sell. That aspect can't be understated as its value speaks for itself. This is a multi-billion dollar brand and they are getting a share of it at an incredible bargain.

Now keep in mind the NFL isn't doing this out of the goodness of its heart. The league has a larger goal in mind… 2021. That's the year when the TV licensees for the major networks run out and you can bet the league will use all of this data to help run the price tag up even higher.

There's also the fact that CBS, NBC and Verizon all have online streaming deals in place with various carve-outs and allowances. It's because of those exclusivities that Twitter was able to obtain the rights for a lower price point.

The NFL entered the negotiations with a lot of leverage but everyone in the room was well aware the world "exclusive" doesn't mean the same thing it usually does in these matters. That opened the door for the NFL to try something different and Twitter was able to capitalize.

This victory gives Twitter a heavily watched (and highly tweeted about) product that could help re-ignite customer growth. While the move ultimately did nothing to help Twitter's stock prices on the day of the announcement, it should have a more positive impact as we get closer to the start of the season this fall.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.