Twitter (NYSE:TWTR) will stream 10 live NFL Thursday night games globally. While the bulls are finding reason to cheer on the news, I think it is important for investors to not get caught up in the hype and carefully assess the economics this may have on Twitter. To be clear, landing this deal is certainly a positive for the company, given the high-profile NFL content, for less than $10 million - a small amount relative to what the traditional broadcasters pay for sports content. This deal will certainly drive new MAUs to the site, but investors should not forget that Twitter remains very much a "show-me" story. Although the current valuation remains a lot more bearable compared to what it traded at a year ago, I would not buy into the stock given that it is still uncertain on whether Twitter can drive sustainable long-term growth in MAU and engagement. Having the content is certainly an important first step for positioning the site for a turnaround, but I will remain on the sidelines for now.
As for the deal, the company will have exclusive global streaming right for 10 NFL Thursday Night games this year, and it will be available without Twitter authentication on mobile devices, smart TVs and PCs. The agreement also included in-game highlights and pre-game periscope from both players and the teams. Note that Twitter bought the digital right to the games, so the TV rights still belongs to the stations, and CBS Corp. (NYSE:CBS)/NBC (CMCSA) will broadcast the games along with Twitter and the NFL Network.
As for the price, media speculated that Twitter paid less than $10 million, which is very reasonable given the $20 million that Yahoo (NASDAQ:YHOO) paid in 2015 and the $450 million that CBS/NBC paid for the same 10 games. Similar to the Yahoo rights, the Twitter feed is essentially a rebroadcast of CBC/NBC games with ads. Unfortunately for Twitter, of the 70 or so ads throughout the game, it can only sell 15-20, and this may not add meaningful ad revenue to the platform.
Bottom line, the NFL deal could draw users onto Twitter's platform, but it remains unclear if the company can address its declining MAU and engagement growth, since logging into a Twitter account to view the games is not required. My view is that Twitter's relevance in mobile social media will likely diminish further as engagement shifts to rival Facebook (NASDAQ:FB) or mobile messaging platforms. For those investors who are still hopeful about TWTR, look no further than its Chinese comp Weibo (NASDAQ:WB), which is facing similar operating risk due to the success of the WeChat mobile messenger that offers a far more compelling mobile ecosystem than solely social media. As such, Weibo is gradually losing mainstream traction, and I suspect Twitter could see a similar fate after Facebook scales its FB Messenger, with features similar to that of WeChat. I remain bearish on TWTR.
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