Twitter Inc (TWTR): Don’t Celebrate Apple TV Talks Yet

TWTR - Twitter Inc (TWTR): Don’t Celebrate Apple TV Talks Yet

Source: Andreas Eldh via Flickr

Twitter Inc (NYSE:TWTR) is reportedly in talks with Apple Inc. (NASDAQ:AAPL) to bring the Twitter app to Apple TV. But as of now, this is more of a tech story than something that should fundamentally affect TWTR stock.

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Last spring, Twitter outbid rivals like Facebook Inc (NASDAQ:FB) for the right to live stream a package of NFL games on Thursday nights. The move was just one of many deals to stream live sports and news content inked by TWTR to expand the social media services footprint.

So, putting a Twitter app on the Apple TV home screen makes sense. Twitter wants to be on as many platforms as possible, especially those that allow a user to stream to TV. Live sports might be the secret sauce that’s going to turn TWTR stock around … but most people don’t want to watch them on a smartphone.

The risk for Twitter stock at this point is that Apple TV or no, the strategy is unlikely to move the needle. More than anything, Twitter needs to restart user stagnant user growth and scale rapidly again. The NFL and Apple TV might very well bring some people on board who never cared about TWTR before. But it’s not clear that there’s enough of a market to make a difference.

TWTR Needs a Lot More than Apple TV

Twitter’s active user base has flatlined at a bit more than 313 million monthly. FB has about 1.7 billion. If TWTR is going to make a dent against FB and Alphabet Inc’s (NASDAQ:GOOG, NASDAQ:GOOGL) Google duopoly, it needs to add hundreds of millions of people.

It’s hard to find content that’s more valuable or popular than the NFL. TWTR couldn’t have found a better partner. But is a small package of 10 games that also are being broadcast on NBC, CBS and the NFL Network going to recruit and retain significant numbers of brand-new Twitter users?

It’s also suspicious that Twitter was able to outbid the much cannier FB for the NFL package with an offer of only $10 million. It’s not like the social network foresaw a fountain of monetization here.

Which brings us to Apple TV. People like to watch live sports on TV, so having a TWTR app on all of the main streaming media devices is a no-brainer. The trouble with Apple TV is that it’s just not all that big.

AAPL has shipped fewer than 40 million Apple TVs since 2007 and it’s fallen to fourth place — behind Roku, Inc. (NASDAQ:AMZN) and Google — in market share. Heck, the entire market for all streaming devices is forecast to grow to only 382 million in 2021.

If AAPL claims 20% of that market, we’re talking about the TWTR app being made available to tens of millions of additional users. Recall that Twitter needs to add hundreds of millions of new users.

Twitter’s content strategy is going to need a hell of a lot more than Apple TV to be a hit. For now, the implications for Twitter stock aren’t much.

As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.

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