The social media company has a market value of $20.4 billion and is said to be looking for about $30 billion. That would make it twice expensive as Disney’s combined deals for Pixar ($6 billion), Marvel ($4 billion), and Lucasfilm ($4 billion).
Analysts are divided, but several consider such a big bet on Twitter to be too risky.
It’s “not obvious” how the entertainment giant could reverse the slowing growth in Twitter’s user base and revenues, says Nomura’s Anthony DiClemente — who playfully notes that “Disney already has 140 characters.”
“Our checks with ad buyers suggest continued weak demand from branded advertisers for Twitter ad inventory,” he adds.
In theory, Disney could benefit by using the platform to expand the digital audience for ABC News and — especially — ESPN’s sports.
But it “cannot leverage its current NFL programming rights across [Twitter’s] user base/platform.” And if it could, linkage might “cannibalize viewership of its TV offering” endangering ESPN’s “peer-leading per-subscriber affiliate fees.”
Brean Capital’s Alan Gould shares a concern that Twitter is “more of a fixer upper than a premium brand” — and a deal “will not help with cord cutting for ESPN and the cable networks.”
He also questions whether Disney “has the in-house talent to turn around [Twitter]. To date we note that none of the traditional media companies have been able to successfully execute on an internet acquisition” including Disney’s of Starwave, AOL’s of Time Warner and News Corp’s of MySpace.
Others are more optimistic.
Consideration of Twitter on top of the recent agreement to pay $1 billion for a third of Major League Baseball’s BAMTech digital platform — with a potential to buy majority control — suggests that “Disney is likely in the early stages of an M&A cycle, not too dissimilar to the acquisitions on the back of Pixar (Marvel, Lucas Films), to build a new set of capabilities,” says Barclays Kannan Venkateshwar.
The film acquisitions were designed to develop franchises and acquire talent. A new cycle “is likely to be more about building platform capabilities for Internet delivery of content.”
It also could bring in Silicon Valley talent that “can be pivoted over time towards video delivery. … This in itself may be difficult to leverage immediately, although over time, it could offer Disney a unique skill set spanning legacy TV, OTT and social media platforms.”
Pivotal Research Group’s Brian Wieser also sees a “clear advantage” in news and sports.
He wonders whether “ownership by one news-gathering organization might cause competitors (i.e. Fox News, CNN, NBC, CBS) to refrain from using [Twitter] or favor a competitor such as Facebook, potentially leading to fewer users of the platform.”
Still, he believes Twitter could “hold up or even improve if managed well, meaning that an
acquisition could still make sense even if many of its contributors relied on the platform less in the future.”