No sooner did Twitter Inc (TWTR) sign a deal to stream NFL games this season then Wall Street said it won’t stop the two things that are killing TWTR stock.
An analyst at Morgan Stanley on Thursday cut his price target on Twitter stock and affirmed their “underweight” rating (that’s a sell call) because user growth and engagement are in decline.
Twitter bulls latched on to the NFL deal as some kind of solution for the struggling social media site. Twitter will live stream 10 Thursday night games this season.
Big deal. TWTR needs a lot more help than football can give it.
NFL Not a Game-Changer for Twitter Stock
Optimists say that when Yahoo! Inc. (YHOO) streamed a live game from London last season, it attracted 15.2 million unique viewers. What they fail to mention is that outside of the teams’ home markets, the only way to watch the game was on Yahoo.
Twitter would need to convert every one of those 15 million unique viewers into active users to make a material dent in flagging user growth. At current levels, TWTR needs to add about 3 million users to add just 1% to its total of monthly active user growth. And it’s not like there isn’t a huge cohort of football fans already using TWTR.
Besides, the idea of watching live sports on a smartphone doesn’t sound all that compelling if you have a better option. Sure, you could stream the game to a TV using Apple Inc.’s (AAPL) Apple TV or Alphabet Inc‘s (GOOG, GOOGL) Chromecast.
But what’s the point of that? Just turn on the damn TV.
TWTR’s End-Around Is Doomed
Indeed, the 10 games Twitter will stream also will be broadcast on CBS Corporation (CBS) or Comcast Corporation‘s (CMCSA) NBC.
Oh, and here’s the killer. CBS and NBC have the rights to stream these games online too.
Just what kind of ratings and conversion rates does TWTR expect to get? As Quartz notes, “Its logo already is splashed on TV commercials, print ads, online ads, and billboards,” but monthly active users are still in decline.
And as for the top line? Forget it. TWTR isn’t doing this deal for the money. As Morgan Stanley points out, Twitter doesn’t have the rights to sell national advertising spots during the game. Those belong to CBS and NBC. The bottom line is that the games will cost more to acquire and stream than they’ll make in revenue, Morgan Stanley notes.
The market sure won’t be crazy about that
Finally, how many people who don’t use Twitter are going to join up to watch football?
Twitter stock’s going to need a lot more than the NFL to reverse its fortunes.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.
