Monday, 29 August 2016

Twitter: will live sports come to the rescue?

The saga of whether Twitter can make a commercial go of it may be reaching a critical juncture. At least, that is the view of Dan Weil of
Institutional Investor, in his recent piece (August 23, 2016), “Pro Sports Contracts Not a Winning Strategy for Twitter”. The issue is this—the number of active Twitter users is stuck at slightly more than 300 million (313 million for the last quarter), only a 3% gain from last year and a fraction of Facebook’s user numbers. Profits remain elusive (a loss of $107 million, on revenues of $602 million, for the most recent quarter) and the stock has tumbled from a high of $69 to $19 (as of the date of the article).

The generic problem of Twitter is described by Weil as—
“It’s too complicated. Casual users often complain that it’s difficult to find what they want, and filter out what they don’t want….”
Faced with these challenges, Twitter’s response in an effort to remain commercially relevant appears to be an attempt to capitalize on sports contents. Thus, Twitter is reported to have signed deals with four major U.S. sports leagues—football (NFL), baseball (MLB), basketball (NBA) and hockey (NHL), to stream some of the live sports contents. In addition, Twitter has deals with Wimbledon and college sports Pac-12 Networks and there are reports of negotiations regarding golf (PGA) and soccer (MLS). The attraction of sports is clear—unlike other contents, it is most valuable when viewed in real time. Taping and the like is a pale second best, if at all (although this blogger continues to watch the rebroadcast of the 2015 playoff game between Ohio State and Alabama, just to be reassured about Ohio State’s victory).

Against that backdrop, what is Twitter getting in these deals? Most notably, it is not getting exclusivity in broadcasting rights in any of them. Indeed, it is not getting any right of live broadcast at all regarding the NBA. For the other sports, it is receiving the right to broadcast a fixed (and small) number of games. Still, this is better than competing platforms, such as Facebook and YouTube, neither of which has, as of yet, received the right to commercialize live sports events. Still, how far will all of this lead to a viewership that will attract meaningful ad revenues for Twitter?

Add to this the very practical question raised by Weil—
“…. [M]any fans won’t watch a game on its mobile platform if they can’t use Wi-Fi, because of the heavy data usage involved [says equity analyst Peter Stabler]. Many who would be using Wi-Fi would be doing so from their homes, where they can just as easily watch the game on TV. “
So what is one to make of this move by Twitter. Well-known media analyst Richard Greenfield sees it perhaps as a way of making the company more attractive for sale to a legacy media company, for which sports is presumably crucial. Media analyst Victor Anthony is of a different view, seeing these deals as a whole-hearted attempt by Twitter to right the company’s financial ship. Under his scenario—
“If they are successful in doing that, there’s no need for it to be sold. If not, they seek out an acquirer.”
That is well and good, this blogger supposes, but he still wonders what will be its value of Twitter if this gambit fails? Exactly where is the value in the service in such a circumstance? No matter what happens, these developments certainly are far-removed from the often naive 140-character messages that this blogger remembers sending when Twitter first became a popular platform. Whether they are any more likely to lead to commercial success, in light of the generic problems in using the Twitter platform, remains the crucial question.

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