Twitter (NYSE:TWTR) and NFL Find Win-Win Situation with Streaming Deal

Twitter Inc. (NYSE:TWTR) has not gotten investors excited in a long time but the microblogging platform succeeded in making the headlines after it won the streaming rights to NFL’s Thursday Night Football games. Earlier this month, Twitter announced that it has secured the rights to stream 10 out of fall’s 16 Thursday night games. In fact, Twitter will be broadcasting the same games that the CBS and NBC networks will broadcast.Twitter’s success in obtaining the rights to those games is surprising because there was a fierce battle between tech firms to win the streaming rights.

twitterTech heavyweights such as Amazon, Facebook and Verizon were reportedly competing with Twitter for the streaming rights. The rumor mill also has that the NFL choose Twitter over other rivals even though Twitter’s bid was lower than the bid of rivals. It was said that Twitter paid a little less than $10M for the streaming rights to the game even though some rivals offered more than $15M to secure the rights to the game.

Here’s why the NFL chose Twitter over other tech companies

The fact that the NFL chose Twitter over other tech companies will be surprising to many people and the surprise is justified. To start with, Twitter is a struggling social media platform – it has 315M Monthly Active Users and it has not been able to monetize its user base effectively. Twitter investors know that user growth has been a challenge for the platform and newer platforms such as Instagram and WhatsApp have overtook Twitter in terms of user growth.

However, while Twitter might be struggling with growing its user base, there’s no denying the fact that the firm is a powerful source of real-time news, data, and analytics. Twitter makes it easy for people to share news stories and engage in a global conversation in real-time, it allows brands to engage with their audiences in real-time, and Twitter makes it easy for brands to measure user engagement.

The NFL understands the power that Twitter wields in the social sphere – not many platforms can boast about presence of the number of world leaders, media brands, journalists, celebrities, and influencers that Twitter has. The NFL chose Twitter because it believes that Twitter offers a treasure-trove of real-time data analytics that advertisers love.

The NFL also understands that the advertisers on its Thursday night games will also be able to reach an engaged audience of people streaming the games, tweeting, mentioning, and hashtaging the game.NFL commissioner Roger Goodell highlighted that publishing on Twitter would provide “additional reach for those brands advertising with our broadcast partners.”

Here’s how Twitter will benefit from the deal

Twitter has been having it rough in the last couple of years and this year is not much different – the stock has lost 66.6% in the last one year and it has lost 26.9% in the year-to-date period. The reason for weakness in Twitter’s stock can be traced to loss in investor confidence because user growth has stalled, monetization is not effective, and profits are elusive at the firm.

However, the streaming deal that Twitter struck with the NFL could solve the user-growth problem for the firm. The Wall Street Journal reports that analysts at Citigroup have posited that “Thursday Night Football” broadcasts averaged 19.5 million viewers in 2015. The analysts went ahead to posit that about 53% of those viewers (10.3 million viewers) are not on Twitter.

The 53% assumption is based on data from GlobalWebIndex that only about 47% of NFL “Thursday Night Football” viewers use Twitter at least once in a month. Twitter has said that people can stream the 10 NFL games free on its platform without opening an account; hence, there’s nothing stopping people from streaming those games directly from Twitter.

If the viewers are impressed with the quality of Twitter’s service we can reasonably expect some of them to sign up for an account on Twitter in order to enjoy a fuller experience with tweets and hashtags. If Twitter succeeds in getting only 20% of those 10.3 million viewers to open an account, the firm would have effectively added 2.06M users at cost of about $5 per user. Twitter reportedly makes about $19 in ad revenue per monthly active user in the U.S. for 2015. I think spending $5 to get a user that is worth $19 is good business.

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