Thanks to a combination of powerful smartphones, ubiquitous connectivity and the explosion of the social web, streaming video is having a new moment in the sun, and one of the up-and-coming stars of this phenomenon is Periscope. The app itself is barely a year old, but it had already built up substantial buzz by the time Twitter acquired the company for an undisclosed sum in March.
That buzz rose to an almost deafening pitch during the much-hyped Mayweather-Pacquiao boxing match last weekend, as users streamed the fight live and shared both their video clips and their thoughts in real time. For Twitter, however, there is a very real downside to all that attention.
From one perspective, Periscope’s popularity is a big win for the social platform. It makes Twitter’s purchase look especially smart, and perhaps even compensates somewhat for the company missing out on the acquisition of Instagram. And it also shows that Twitter has growth prospects in two of the most important segments of the technology and media market: namely, mobile and video. For more on that subject, Fortune’s Erin Griffith has an in-depth look at how video has helped turn Vice Media and BuzzFeed into new-media powerhouses.
Given all that, it’s not surprising Twitter CEO Dick Costolo would take to his company’s social platform to boast about Periscope’s success during the match, with a tweet that said simply: “And the winner is… @periscopeco.” Coming on the heels of a somewhat lackluster earnings report for the most recent quarter—one which sent the company’s stock down by more than 20% and shaved more than $8 billion from its market value—the success of Periscope was no doubt some much-needed good news.
Boasting about Periscope’s live-streaming success puts the company in a somewhat awkward position, however, especially with its existing and potential TV broadcasting partners. Why? Because the Mayweather-Pacquiao fight was a pay-per-view event, one with hundreds of millions (if not billions) of dollars at stake, and most of the live streams of the match being shared widely on Twitter were illegal. (There was similar activity on Periscope’s main streaming competitor, Meerkat).
For users — and especially those who apparently tried and failed to buy access to the official stream, due to technical difficulties at Time Warner Cable and other providers — the live streams were a huge bonus. But for TV broadcasters, many of whom see such sporting events as one of the few remaining opportunities to actually get viewers to pay for content, the success of Periscope looks like yet another drive-by shooting aimed at the heart of their revenue model—and Twitter is driving the getaway car.
This puts Twitter in a particularly difficult spot, because it has been working hard for the better part of the past two years to make its social platform the default “second screen” for TV events, whether it’s the Academy Awards or the Olympics. It has signed up broadcasters left and right, and tried to win them over by offering special features like the ability to promote short clips of their events.
Like most other media entities, HBO and Showtime — who collaborated on the Mayweather-Pacquaio match — don’t have much choice but to use social networks such as Twitter and Facebook to promote their content, at least if they want to reach the millennial audience that almost all media outlets see as the Holy Grail when it comes to advertising revenue. The two broadcasters even used Periscope themselves to stream clips of the action, but their offerings amounted to just bits of flotsam floating in a sea of unlicensed content from other sources.
After the match, Periscope co-founder Kayvon Beykpour said on Twitter that his company takes piracy seriously, and that his staff were busy during the fight removing illegal content. Chris Sacca, one of Twitter’s most prominent financial backers, said that the event was a clear sign of Periscope’s power as a social tool for video content, despite the actions of some copyright infringers and pirates.
The larger problem for broadcasters like HBO, however, is that the more powerful a tool like Periscope becomes, the more value accrues to it instead of to the entity producing the content—and that winds up helping Twitter more than it does the outlets who pay billions to produce things like the Mayweather-Pacquaio match. This tension between content creator and distribution platform is also a growing reality for newspapers in their relationships with Facebook.
So while Twitter is busy trying to promote itself as a partner for media entities like HBO and Showtime, the success of things like Periscope makes it seem more like a competitor than a partner. And that impression is only going to grow stronger, even if Dick Costolo manages to smooth the waters after his boastful tweet.