Morgan Stanley thinks Twitter’s big NFL deal isn’t really a big deal

A win for Twitter?
A win for Twitter?
Image: AP Photo/David Richard
We may earn a commission from links on this page.

This week, Twitter snagged the rights to stream 10 of 16 Thursday night National Football League games. This is clearly a big deal.

For the NFL, it’s the first season-long streaming deal. For Twitter, which beat out Facebook, Yahoo, Amazon, and Verizon, it’s a beacon of hope toward growing its user base. And Twitter appears to be getting a bargain, reportedly paying less than $10 million for the rights to 10 games. Compare that to the $20 million Yahoo reportedly paid last year to stream a single regular season game.

Yet Brian Nowak at Morgan Stanley is skeptical. From a revenue standpoint, he says the deal is “immaterial.”

“The monetary attractiveness of these digital streaming rights is somewhat muted due to the fact that TWTR will not be able to sell any of the national advertising spots during the games,” he wrote in an April 6 analyst note.

CBS and NBC retain the rights to sell national advertising spots, leaving Twitter with local affiliate ad spots to sell, “which make up roughly 2-3 minutes of advertising per hour,” according to the report. A Twitter representative confirmed this information is correct.

If one assumes that Twitter will sell ads at rates comparable to primetime and reach 20% more 18- to 49-year-old users than it currently has, Nowak estimates that the deal will generate $6 million in ad revenue. That “would (likely) not cover the NFL content rights costs” plus additional investments in data centers.

Twitter obviously views the deal as a way to gain new users, but exposure hasn’t historically translated to user growth. Its logo already is splashed on TV commercials, print ads, online ads, and billboards, but the company actually lost 2 million monthly active users in the holiday quarter. It did say in February that its user numbers “bounce[d] back to Q3 levels.” Still, the social network will have a hard time convincing NFL viewers to actually sign up for an account since the stream will be available to people who aren’t logged in.

Ultimately, Nowak believes “the core Twitter platform and user experience needs to be simplified and improved if the company hopes to convert these streamers to monthly Twitter users.” Of course, if it could do that, it wouldn’t need to bank so heavily on pro football.