Disney (DIS) Could Buy Twitter (TWTR) to Save ESPN
It seems like Wall Street has been speculating about a Twitter TWTR buyout for years now, but things are finally starting to get serious thanks to potential suitors like Salesforce CRM and Alphabet GOOGL. Now, according to Bloomberg, media giant Disney DIS has also entered the fray.
Disney is apparently working with a financial adviser to evaluate a bid for the struggling social media site. The two companies should be familiar with each other—Twitter CEO Jack Dorsey serves on the board at Disney—and a takeover could help solve problems for both businesses.
For Twitter, a buyout almost certainly couldn’t make things worse. The company has struggled to grow its user base for years, and the stock has consistently disappointed investors. On the other hand, Disney, which is no longer the guaranteed long-term hold it once was, could use Twitter’s live experience to save its struggling sports broadcasting division.
Reviving ESPN
The cord-cutting phenomenon has put a serious strain on Disney, which depends on its cable networks like ESPN for a majority of its revenue. As people switch to streaming services like Netflix NFLX, Hulu, and Amazon’s AMZN Instant Video, they sacrifice specific channels like ESPN, and thanks to the high costs of sports broadcasting rights, the industry lacks a strong over-the-top sports streaming service.
Enter Twitter, Disney’s unexpected hero. Twitter has spent much of the last year investing in its sports live streaming business. After winning the rights to stream 10 of the NFL’s Thursday Night Football games this year, Twitter went on a spending spree, scooping up rights to several PAC-12 sports, Wimbledon, two NBA-related shows, and games from the MLB and NHL (also read: Twitter Goes Full Throttle on Live Streaming).
While some investors were left scratching their heads as the social media giant entered the broadcasting business, Twitter defended its investments brilliantly. Sports fans are already interact with Twitter during the games, why not let them watch the games on the site too?
Herein lies the value for Disney. Buying Twitter is not a social media play, it’s a broadcasting play. Twitter’s rights to stream sports would become Disney’s right to stream sports. Full-blown Twitter-ESPN integration changes the capabilities of sports broadcasting. Being an at-home fan could become more social and interactive than ever.
Bottom Line
ESPN is far from dead, but the network needs to be reinvigorated. Disney has already showed its willingness to try new things with the worldwide leader in sports—its purchase of BAMTech in August has opened the door for an ESPN-branded streaming option.
Nevertheless, Twitter has the infrastructure, licensing, and fan base for a successful sports media transformation. At the right price, buying Twitter could make a lot of sense for Disney.
For more ideas on who should scoop up Twitter, check out: Here's Why Salesforce Shouldn't Buy Twitter, But Google Should.
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