Amazon and Twitch continue their expansion while managing the interests of numerous parties and sides.

Twitch made headlines in 2014 when Amazon paid almost $1 billion for the platform. Now, they have expanded beyond video games and are continuing to make some people millionaires while managing numerous parties that likely have some conflicts of interest.

The live video game streaming service, Twitch, made headlines in 2014 when Amazon acquired the platform at a price of $970 million (all cash and after Google had announced their own intentions to buy it).[i] At the time, the service accounted for up to 2% of all US internet traffic during peak times and 40% of all online streaming content.[ii]

At a high level, the platform allows people to live stream their actions (usually playing video games) on a personal “channel” for other people to watch. Amazon monetizes this format by showing advertisements to viewers and offering a premium service that gives subscribers special privileges and features (like less ads). Any user can start a channel and stream their content for free and any user can watch as much content as they like for free as well.

Making People Famous

The platform shares revenue with its streamers and several have made small fortunes (over $1 million USD) and achieved celebrity status as a result.[iii] Tens of thousands of people around the world tune in to watch their streams several times a week and some have created a schedule that replicates several aspects of cable television (a set schedule with a somewhat predictable lineup of content). Currently the most popular streamer, 24-year old Michael Grzesiek (“shroud”), has clocked over 13.1 million hours of viewership in the month of February (24 days in to the month) and averages over 60k viewers at a time.[iv] Interestingly, Twitch allows streamers to link to other platforms on their channel page that are direct competitors to Twitch (like YouTube). This implies that the “streamer” side of the platform clearly has some bargaining power, as Twitch would rather keep viewers’ attention on their own platform.

Expanding Beyond Video Games

While most content played on Twitch is still video games, Twitch has also branched out into other areas, including fitness, sports, arts and crafts, travel, etc.[v] This play has likely increased total viewership and hours watched, but also creates some tension between the various players. The features needed to make streaming a video game smooth are likely not the exact same as those needed to run a successful fitness stream and the multiple parties will inherently have some conflict over demand for features. It will be interesting to see if Twitch can continue to grow in these other areas or if they will just be unnecessary distractions from their core business and platform.

Network Deals with Large Players

Twitch has also made news by signing contracts with major players such as the National Basketball Association (NBA).[vi] In addition to signing with the NBA, they also signed a two-year $90 million contract with Activision Blizzard to stream their online video game league.[vii] This move adds even more parties to the platform and will make it increasingly difficult for Twitch to balance the interests and needs of each without creating inherent conflict (as we saw with Facebook and users v advertisers).

Monetization Strategy

As mentioned, Amazon monetizes the platform primarily by showing advertisements, but several popular streamers also participate in Amazon’s associate/affiliate program, displaying links to products on their page that link directly to Amazon. Twitch has also introduced the ability to buy games directly from Amazon on the platform, putting it directly at odds with other game selling platforms like Valve/Steam.[viii]

With more average viewers that some major television networks[ix], Twitch has undoubtedly found a popular niche connecting streamers, viewers, video game developers, and advertisers all in one place. Only time will tell if Amazon and Twitch can adequately manage the interests of all parties.

 

Sources:

[i] “Amazon Buys Twitch for $970 million in cash”. Business Insider. https://www.businessinsider.com/amazon-buys-twitch-2014-8. Accessed 23 February 2019.

[ii] “Amazon Buys Twitch for $970 million in cash”. Business Insider. https://www.businessinsider.com/amazon-buys-twitch-2014-8. Accessed 23 February 2019.

[iii] “6 of Twitch’s Richest Streamers and How Much They Make”. Gamebyte. https://www.gamebyte.com/6-of-twitchs-richest-streamers/. Accessed 23 February 2019.

[iv] “Twitchmetrics: shroud”. TwitchMetrics. https://www.twitchmetrics.net/c/37402112-shroud. Accessed 23 February 2019.

[v] “Twitch is ditching IRL label, introducing distinct categories for ASMR, vlogging and more”. Polygon. https://www.polygon.com/2018/8/10/17674306/twitch-irl-creative-new-categories. Accessed 23 February 2019.

[vi] “NBA twitch reach deal on 2k league streaming rights”. The Washington Post. https://www.washingtonpost.com/news/sports/wp/2018/04/18/nba-twitch-reach-deal-on-2k-league-streaming-rights/?noredirect=on&utm_term=.170057337c62. Accessed 23 February 2019.

[vii] “Overwatch League to be streamed on Twitch.tv in two-year, $90 million deal”. ESPN. http://www.espn.com/esports/story/_/id/22015103/overwatch-league-broadcast-twitchtv-two-year-90-million-deal. Accessed 23 February 2019.

[viii] “How to Buy Games on Twitch”. Twitch. https://help.twitch.tv/customer/portal/articles/2771293-how-to-buy-games-on-twitch#Buy. Accessed 23 February 2019.

[ix] “Twitch now has as many viewers as some cable TV stations”. Cinemablend. https://www.cinemablend.com/games/2310981/twitch-now-has-as-many-viewers-as-some-cable-tv-stations. Accessed 23 February 2019.

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