Twitter Successfully Streams First Football Game; Here’s Why It Matters

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Twitter (NYSE:TWTR) successfully live streamed New York Jets-Buffalo Bills Thursday Night Football (TNF) game on September 15, in what could potentially be a watershed moment for the company and the future of live streaming. Twitter had recently paid $10 million to the National Football League (NFL) to stream 10 TNF games in a bid to lead the live sports streaming revolution, combining the worlds of live sports and real-time fan chatter, and it seems to have gone well in the first game. Streaming a glitch-free first game was very important for Twitter, considering live-streaming is being touted as Twitter’s biggest bet to turn things around in terms of its top line and user base growth. This was also being seen as a test run for Twitter’s recently signed deals with several companies to live-stream events on its platform, including 120 Sports, Bloomberg TV and the other major sports leagues in the U.S.- Major League Baseball (MLB), the National Hockey League (NHL) and the National Basketball Association (NBA).

Twitter’s average monthly active users (MAUs) grew just 3% y-o-y and 1% quarter-over-quarter to 313 million in Q2 2016. The company’s struggle to grow its active user base has been the primary investor concern for the past five quarters, and the company recently started focusing on video to attract new users through its different offerings such as Periscope, Vine and live-streaming. Twitter’s increasing focus on video content and content creators is a step in the right direction, considering that video usage is rising at a rapid pace and video has much higher engagement and monetization potential than banner and text ads. [1] Advertisers are also increasing their focus on live streaming and digital video advertising; according to a January 2016 research report by eMarketer, nearly 80% of U.S. retail executives stated that producing live streaming video events helps them create more authentic interaction with audiences. A survey from Cowen and Company published in Q1 2016 estimates that U.S. digital video ad spending will reach $28.1 billion in 2020, up from $9.9 billion in 2016.

According to our estimates, Twitter’s annual revenues from Periscope could range from $100 million to $200 million by 2018, depending on the number of video minutes used in ads. This number is also dependent on both the total video minutes broadcast on Twitter and the revenue sharing arrangement with the content providers. Our estimated revenues from Periscope for 2018 are not very significant relative to total Twitter revenues. That said, we believe the platform holds strong potential for the company in the long term.

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As Twitter starts to monetize the platform, there could be several revenue generating opportunities as usage increases. Attracting key influencers to the platform will be critical for Twitter, as verified accounts and streams tend to attract thousands more viewers compared to unverified streams, considering identification of good broadcasts still remains somewhat of an issue. We believe introducing the Amplify program to Periscope is the right first step taken by Twitter in this direction.

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Notes:
  1. Why brands are failing to maximise the potential of video for advertising, Marketing Tech, Feb 2016 []