An Opportunity 10X Bigger Than The Presidential Debates: Twitter Inc (TWTR) Stock

  • Twitter has had more success than YouTube with 'live' streaming the US presidential debates.
  • The skeptics seem to be worried about 'what after' the presidential debates.
  • Twitter is now reportedly bidding for media rights to another sporting event, and it's way bigger than the debates.
TWTR Stock - An Opportunity 10X The Size Of The Presidential Debates For Twitter Inc

Twitter's (NYSE:TWTR) live streaming initiatives have arguably been a success, with the US presidential debates gaining traction, debate after debate. In fact, more viewers reportedly watched the debates live on Twitter, than they did on YouTube. But that hasn't calmed the skeptics, who are understandably worried about 'what after' the debates. Twitter has already seen some progress on the sports live streaming front with the NFL. Now, reportedly, Twitter is bidding for rights to a sporting event that's massive compared to the presidential debates, and it's well within Twitter's grasp.

A 10X Opportunity For Twitter Live Streaming

Amazon (NASDAQ:AMZN), Facebook (NASDAQ:FB), Walt Disney's (NYSE:DIS) ESPN and Twitter are all bidding for media rights to a hugely popular cricketing event, the Indian Premier League (IPL). Why? Well, it's pretty simple. The IPL reportedly has a TV viewership of over 361 million. That's nearly 6X the TV viewership of the 2nd presidential debate, which saw ~66.5 million viewers tune in on their TV sets, and over 4X the TV audience (~84 million) of the first debate. Assume that another 80 million people watched the final debate last night, and the total audience is about 230 million viewers. The IPL still has well over 1.5X the TV audience. But, when it comes to live streaming, and in markets outside the United States, internet penetration and internet audiences are what we're worried about.

In 2016, IPL viewership on Hotstar, a popular mobile streaming app in India, rose from 41 million to 100 million. So, not only is the audience there, it's also growing at a fast clip (144%). And with data costs set to plunge in the region, that number is going to swell. Smartphone sales numbers in the region will second that theory. But even if you assume that the internet audience for the event will grow only by 50%, the IPL should have ~150 million online viewers. Do note that all of these estimates are based on viewership numbers from one app alone. Obviously, there are other sources from which to stream this content.

Also Read: Twitter Stock: The First Signs Of A Turnaround Emerge For Twitter Inc (TWTR)

Now to put that into perspective, the online viewership audience we're talking about here is well over 10X the live streaming numbers for Twitter and YouTube put together (for the debates). The first presidential debate attracted live viewership of 2.5 million viewers on Twitter, and 2 million on YouTube, while the second debate lured 3.2 million viewers on Twitter, and 1.5 million viewers on YouTube. All put together, that's 9.2 million. Assume another 5 million viewers streamed the debate live last night, and that totals to 15 million viewers. Clearly, the IPL is massive, even if you compare it to YouTube's over 124 million views of content related to the debates. Note that YouTube's number pertains to any content related to the debates, and not necessarily the debates themselves, and that 124 million is the number of views, not viewers. And especially for Twitter, the IPL could be a great way to expand its streaming audience.

The Economics Of It

The good part is, the opportunity is very much within Twitter's grasp. According to the same report we quoted earlier, Star India, which owns Hotstar, bid ~$45 million in today's Dollar terms (or INR 302.2 crores in 2015) to win the global Internet and mobile rights for IPL for a three-year period. So, that's about $15 million a year, and Twitter reportedly paid ~$10 million for NFL streaming rights for one season. So, that's definitely affordable. The fact that Facebook, Amazon and ESPN also want the rights might push up the price, but it should still be affordable.

What's on offer in terms of revenue? Chump change. For Sony, which has exclusive TV rights for the event "network sales, licensing and telephony, the league generated around Rs 1200 crore ad revenue in its 2016 edition." That's about $180 million. And Hotstar reportedly raked in about INR 40-50 crores in 2016, which translates to about $6-7.5 million for the year. Ad spends related to the IPL grew by 15-20% in 2016, and could grow to ~$6.5-8.2 million assuming a 10% growth next year. So, why bother? Because the benefits go well beyond the direct revenue that's on offer.

For starters, this is an audience that probably doesn't watch as much of the NFL or the NBA. So, it's a new audience (at least largely). The obvious advantage is greater engagement and user acquisition, both of which Twitter can use more of. A larger, more engaged audience naturally allows Twitter to monetize these viewers even off these live streams. And one would assume that Twitter, with its global presence, could possibly take the stream to an even larger audience. So, in every way, it's probably worth the Dollars spent for Twitter, which now, more than ever, needs to see user growth and better engagement. What's more, it's one step further in Twitter's transition into the one-stop shop for live video content.

Also Read: Twitter Stock: Twitter Inc (TWTR) Doesn't Need A Buyout To Rise Again

Summing It Up

The IPL attracts an online streaming audience that's way bigger than the viewership Twitter managed to garner with live streams of the presidential debates. The direct revenue addition will probably be insignificant, even if Twitter does break even on the event. But the potential benefits include higher engagement levels and user acquisition, both of which Twitter needs, and both of which will allow Twitter to monetize its user base off the live streams. What's more, it's one step further in Twitter's attempt at becoming the hub for live video content.

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Vikram Nagarkar Vikram Nagarkar   on Amigobulls :

Neither Amigobulls, nor any members of its staff hold positions in any of the stocks discussed in this post. The author may not be a certified/registered investment advisor, and the opinions expressed should not be treated as investment advice.

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