1 Major Hurdle in Twitter's pursuit of Becoming a Bigger Player in Live Sports

With Twitter already set to live-stream 10 Thursday night NFL games this fall, the company is looking to expand its live programming in a significant way. The live-streaming push has the potential to breathe new life into the social media company, especially with younger users who have cut the cord but still want to see these events live.
But there are some significant hurdles for Twitter to overcome, too, and they could force it to the sidelines of the live-streaming game — or at least confine it to a bench-player role while streaming services from Amazon (NASDAQ: AMZN) and Netflix (NASDAQ: NFLX) see the most important play time.

Chasing after new deals in sports, politics, and news

Twitter execs have been talking with representatives from other major sports leagues, as well as Turner Broadcasting, about the possibility of expanding its live sports lineup, according to a recent report in Recode. The company inked a deal to stream some original programming for the NBA, as well as one to broadcast 150 Pac-12 college athletic events in addition to deals to live-stream the Democratic and Republican conventions this month.

And it apparently doesn’t end there. Fortune reported that Twitter was working on no fewer than 10 live-streaming deals for sports and major events.

“In effect, Twitter is trying to become not just the ‘second screen’ for viewers interested in football and other live events, but the first screen as well,” Fortune noted.

The live-streaming push marks an aggressive change in strategy for Twitter, one that should no doubt dovetail with its efforts to ramp up video advertising. But there’s one thing that might keep Twitter’s live-streaming dreams from becoming a reality: It has no paying subscribers.

If it looks like a cable company…

Major sports leagues and cable networks are used to doing business with cable companies and satellite TV providers. Those businesses collect monthly subscription rates, allowing them to negotiate carriage fees with the different organizations, which are then passed along to subscribers in their monthly bundle prices.

Twitter, however, relies on advertising for nearly 90% of its revenue. Its ability to pay for rights depends on its success selling ads around the content.

There’s also some concern from the TV networks that selling rights to a free service such as Twitter could hurt their business, Recode reports, since it has the potential to subvert the subscription business model.

Those factors may steer business away from Twitter and toward the subscription-based streamers like Netflix and Amazon.

Ted Leonsis, the Washington Capitals owner who is launching his own sports subscription network, told Recode that he’d be more inclined to deal with Amazon for streaming, saying that its Prime service makes it “look like a cable company.”

Amazon Prime has an estimated 54 million subscribers, each paying $99 a year for the service. Netflix, meanwhile, has more than 77 million paying subscribers, each forking over between $8 and $12 a month.

There’s more than one way to stream for an event

If Recode’s sources are right, and Twitter loses live-streaming rights to companies like Amazon or Netflix, all hope may not be lost. Twitter could tweak its approach to capitalize on sporting events with pre- and post-event coverage before and after, or with some type of alternative coverage that looks to build out its second-screen function. And that seems to be what it’s doing with the NBA, focusing on pregame shows rather than live feeds of the games themselves.

That Twitter is so aggressively chasing live-streaming should come as welcome news to investors. It may not be an unmitigated success — and Twitter may find itself losing streaming rights — but it’s a sign that Jack Dorsey and company have recognized the need for a major shift in strategy, and one that has the potential to put some of the company’s biggest strengths to use.

Twitter needs to find its place with users, and even more importantly, with advertisers. It’s falling behind its competition, and growth is slipping away, now trailing the larger Facebook by 52% to 37% in year-over-year revenue growth.

Can Twitter pull this off?

It recent quarters, Twitter seems to have been drawing its focus onto video. Its video ads perform well, executives say, and the company is encouraging advertisers to shift their efforts from traditional promoted tweets to video ads. If it’s successful, those efforts should dovetail with the push into live streaming events.

But becoming a major player in live sports is going to be a challenge for the company, and it may end up looking different than it’s envisioned today.

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