Ah Twitch

Android Headliner: Why Buying Twitch Is Good For Amazon, And How It Could Benefit Streamers

August 31, 2014 - Written By Justin Diaz

By now everyone already knows about the deal between online retail giant Amazon, and the game streaming website behemoth Twitch that came out of nowhere just over three years ago, and likely there have already been plenty of talks about it. We have reported on the facts about the deal going down, something that may have surprised a lot of people considering everyone thought that Google and YouTube had this acquisition already in the bag. News broke just over a week ago though that the deal between Twitch and YouTube might be falling through, and shortly after that we started to hear rumors about Amazon being the potential new buyer. Confirmation on that came quickly as well, and here we are 6 days later beginning to let everything sink in. Amazon is purchasing Twitch for $1.1 billion, with $970 million of that in cash, and it was a much better move than choosing to make the Fire Phone exclusive on AT&T’s network.

Twitch stated that they chose Amazon because they believe in what Twitch is doing and they share the same views of where Twitch wants to take things, and, that Amazon could help them reach that point faster than they could by themselves and presumably faster than YouTube since they made the decision to take Amazon’s offer instead. Amazon is a mega retail giant and they already have some form of streaming video available for customers with their Prime service, which is not too unlike that of Netflix and Hulu Plus, but Twitch is a different beast and should be able to bring Amazon forms of revenue that they have never known before. Twitch brings in revenue from ads that are placed in the video streams of the content being put on by their broadcasters, of which those broadcasters get a cut through the $4.99 a month sub fee they can charge to other Twitch members(viewers) which Twitch also makes money from. While there are plenty of Twitch users that may watch a few videos a week for short amounts of time, a large number of users are heavily engaged in the content that they watch and spend much more time viewing the streams of popular broadcasters. These are the users that Twitch makes the most money off of and now Amazon will be making a chunk of that too.

Currently Amazon doesn’t have a revenue like this and not only are they gaining a totally unconventional cash flow that is new to them, they are getting all of Twitch’s loyal user base. Arguably the users that watch popular streams of high intensity League of Legends or Dota 2 matches as well as other generally entertaining broadcasters are more loyal and more engaged than those that pay for content through Amazon’s Prime instant video service. The Prime instant video may have more user members, but they more than likely aren’t streaming the premium content every single day which is what Amazon charges the most for. As Twitch grows(and they believe they can grow fast with Amazon)their current annual revenue which is said to be around the mark of $72 million at the least between ads and streamer subs, will also only grow and Amazon is now going to have a cut of that. This could also help streamers, as it might open up the doors for them to potentially make more money off of subs, although that would depend on what Amazon has planned for Twitch in the way generate money, if they have any plans to change things in that regard at all. One of the things that Twitch was keen to point out during the initial announcement about the acquisition was that they most importantly would be able to remain independent, which sounds like they should be able to keep things relatively the same on all fronts, but Amazon will surely have some changes they will want to make so that they can find a lucrative sweet spot in the way content is delivered.

A main concern when YouTube was still on the table as the buyer was that streamers would be subject to YouTube’s policies regarding copyrighted material, which could have seen major changes to the types of songs or other audio that broadcasters are currently allowed to use in their streams. With Amazon now the new buyer, there is probably a good chance things will get to stay the same in that area, which would most likely keep users(both broadcasters and viewers)happy. If the content doesn’t end up getting slapped with a bunch of copyright regulations, than the viewers would seem more likely to stick around and watch their favorite broadcasts, which would make Twitch more money, which would make Amazon more money. It will be interesting in time to see if Amazon ends up making more revenue from Twitch than they do their own Prime video.