How Twitter Can Benefit From A Deal With Apple TV

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TWTR: Twitter logo
TWTR
Twitter

Reports suggest that  Twitter (NYSE:TWTR) might launch its app on Apple TV, which will allow users of Apple TV to view Twitter’s live streaming content. While the National Football League (NFL) games (which Twitter gained live streaming rights for earlier this year) are already available on Apple TV, users need to pay for this subscription and the content is not live. The Twitter app will allow free access to live streaming. This deal can allow Twitter to distribute its content more widely, allowing users to watch its live streaming on television screens. Apple TV’s installed user base is expected to cross 35 million by 2018 and Twitter can get access to this entire user base. As the company looks to distinguish itself among  social media outlets and focuses on live streaming content, this wider user base can lead to better monetization of this strategy and higher video advertising revenue.

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Higher Advertising Revenues Can Set Off Content Acquisition Costs

Twitter’s strategy to obtain live streaming rights of popular events can put pressure on its margins, due to high content acquisition costs. Still, a wider distribution base can ensure that higher advertising revenues that compensate for these higher costs. As per our estimates, Twitter’s U.S. advertising revenue per 1,000 timeline views will increase from nearly $12 in 2016 to around $20 by the end of our forecast period.

We believe new ad formats and higher return on investment will attract advertisers to Twitter’s platform. As it distributes its live streaming content widely, advertisers will get access to a larger audience and this should attract them to Twitter’s platform.

Live streaming is still at an early stage on Twitter’s platform and the company has not disclosed yet viewership numbers. That said, the company is actively inking deals to increase its live streaming content. With several such deals under its belt, it appears that Twitter is now looking at ways to increase distribution of this content and a deal with Apple TV should help in this cause. Watching clips of sporting events on mobile devices might be convenient, though people prefer to watch sports on large screens.  By making its app available on Apple TV, Twitter could solve for this challenge.

As Twitter struggles to grow its user base and increase user engagement, consequently creating a high return on investment for advertisers, it is looking at several ways to make itself stand out. As a news-based platform with live streaming of sports and other important events seems, the company will have a new identity, one that difffers the “social media” tag it now has. We believe a wider distribution of its content via Apple TV can attract more advertisers to its platform, ensuring that the impact on margins due to high content costs is limited. This strategy can drive higher revenues for the company in the long term.

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