Snapchat Inc. (NYSE: SNAP) shares saw a slight uptick on Monday after it was reported by the Wall Street Journal that the mobile photo messaging service inked a deal with Time Warner Inc. (NYSE: TWX) and Warner Bros. studio. The deal is valued at roughly $100 million.
According to the plan, up to 10 original shows will by launched annually on Snapchat’s platform.
The $100 million deal reflects Time Warner’s show investment for the app, along with other advertising commitments from the likes of HBO and Warner Bros.
Snapchat’s clips don’t tend to last that long, so venturing into this type of content creation might be a stretch. Its shows run around three to five minutes, so traditional television companies don’t view its efforts as a threat to their core pay-TV businesses.
The two-year deal is perhaps one of the largest show development deal Snap has landed to date and shows how Snap is attempting to reinvent television for young, mobile users. When the company was touring on its roadshow before its public offering, Imran Khan, Snap’s chief strategist, framed Snap’s opportunity by highlighting how young people ages 18 to 24 have shifted their attention to mobile phones from traditional TV.
According the Wall Street Journal:
Snap will keep 50% of the ad revenue from shows, while its media partners will keep the other half, The Wall Street Journal has previously reported. It is a less attractive split than what Snap offered earlier on for its “Discover” publisher platform, where at least some partners were allowed to keep 70% of the ad revenue if they sold the ads.
In an interview, Gary Ginsberg, Time Warner’s executive vice president of corporate marketing and communications, said:
You can envision a lot of really compelling marketing and programming that will drive viewership to our television and film content and new users for our emerging direct-to-consumer services.
Shares of Snapchat were last seen up 1.3% at $17.78 on Monday, with a consensus analyst price target of $20.90 and a 52-week range of $17.00 to $29.44.
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