If Twitter Inc (TWTR) thinks it can boost shares of its stock with a live stream package of NFL games this season, they should ask Yahoo! Inc. (YHOO) about how well that works. Apart from costing a lot of money, the NFL did nothing for struggling web site last year, and it’s likely to have an equally disappointing effect on Twitter stock this year.
TWTR made a splash after it said the NFL chose it as the league’s exclusive global partner for streaming Thursday night games in the 2016 season. The agreement also includes the rights to live stream in-game highlights and pre-game broadcasts from players and teams. Twitter will deliver the content through Periscope, its live-streaming video platform.
Partnering with the NFL is great press, and you can’t fault TWTR for investing in the plan. Football is by far the most popular U.S. sport and its games are coveted by advertisers. That also makes the rights to deliver them so expensive that it’s hard to make a profit.
We don’t know how YHOO ultimately made out with the deal. It reportedly cost the company $20 million to secure the rights. But we do know that it had to offer steep discounts in order to sell out its ad inventory. Then the game came and went and we pretty much never heard about it again. It didn’t rate a mention in the annual report.
Fine. It was a marketing expense.
Besides, the figures involved with live streaming the NFL Thursday night line up sound like small beer. TWTR reportedly paid less than $10 million for 10 games. Maybe that will turn out to be a steal.
Twitter Stock Is Still Lost
But if it’s such a terrific opportunity, why did Facebook Inc (FB) pull its bid last week? Why did Verizon Communications Inc. (VZ) and Amazon.com, Inc. (AMZN) — Amazon, for crying out loud! — let themselves be outbid?
Which brings us to this: The point of winning the rights to stream or broadcast NFL games isn’t to make a lot of money anyway. CBS Corporation (CBS) and NBC, part of Comcast Corporation (CMCSA), are going to lose money broadcasting Thursday night NFL games for the upcoming season. It’s a way to invest in the brand.
TWTR’s user growth has stalled. That’s why Twitter stock has been a loser. And if the NFL can bring new eyeballs that stick around once the football season is over, that would be wonderful. But is a lack of compelling content the cause of Twitter’s stalled user growth?
Maybe by expanding its content offerings to football fans, Twitter can restart stalled user growth. But becoming like everyone else in the sector isn’t why investors piled into the IPO. Content is hard and expensive. It needs huge scale to work. Worst of all, you have to steal market share from Facebook and Alphabet Inc‘s (GOOG, GOOGL) Google.
Perhaps one day we’ll see the NFL deal as the moment when TWTR discovered itself. If you feel comfortable with that bet, shares are a buy. But it’s more likely that the gambit is as effective for Twitter as it was for Yahoo.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.
