Not just video games, but a video game streaming site. Some of you might be going, “Huh?” and don’t worry, we were too. If you are unfamiliar with Twitch.tv, then that’s a good place to start. Twitch.tv is, according to their website, “the world’s leading video platform and community for gamers.” With over 55 million visitors per month, they mean it – they are number one. For gamers, Twitch is a great place to connect with like-minded individuals and either chat, watch gamers play, or broadcast themselves playing. There are gaming shows, events, and just about anything else you could wish for in the gamer-verse.
As far as sharing sites go, Twitch.tv is just about as cool as it gets: An enormous, online community. Free subscriptions to content, or – for a low monthly fee of $5 – premium subscriptions that still include just about everything you get for free, except now you have access to a private chat room. Even though my gaming experience peaked at owning a 1996 teal Gameboy, I can recognize the value of Twitch -it’s valuable to the gamers, the streamers, and the advertisers. And, Amazon?
Yes, Amazon. Like any other major corporation, Amazon likes money. Moreover, they like making more money. And they’re not going to spend money unless at some point, maybe years, months or just days down the line, it will multiply, grow, and make them even more profitable. The $2 billion they’re funneling into India is due to the nation’s potential to become the next ecommerce frontier. Amazon bought Twitch for $970 million, and you can bet they anticipate that money coming right back to them.
How can a video and game-streaming site bring Amazon profit, enough to justify a nearly $1 billion dollar price tag? Since Twitch’s content is free aside from the premium $5 subscription, it drives greater revenue from ads. With about 600,000 active subscribers, their consumer generated income is estimated to be at $36 million. A source reported ad revenue to surpass that, putting their yearly income at a minimum of $72 million. That number is expected to grow with subscriptions, which were only released in February.
With Amazon’s Netflix-eque Prime Video platform, it’s been speculated that Amazon wants to broaden their reach via video. After all, Twitch is not far behind Prime in terms of downstream traffic. Prime represents about 1.9% of all U.S. downstream traffic during peak times, where as Twitch comes in at 1.35%. For a free site that relies on the passion of its niche, that’s a very attractive number. Enough to attract users to Amazon’s other features and services? That’s what Amazon hopes.
Johnson, Eric. “Why Amazon Really Bought Twitch.” Recode. CNBC, 26 Aug. 2014. Web. 27 Aug. 2014.