A look into how the acquisition has worked out for Amazon and Twitch over the last year
On September 25, 2014, Amazon announced its successful acquisition of Twitch.tv. The company paid $970 million in cash up front with stock options that took the value of the deal beyond $1 billion. Twitch is a service based business, which lets its users stream their gaming sessions. The takeover by Amazon turned heads as to how its biggest purchase so far would bolster growth for the company.
Amazon wanted to make a name in the market of streaming-media players and Twitch, being a leader in the market, presented the right opportunity for acquisition. The takeover kept Twitch satisfied as it could function as an independent entity continuing to carry out its operations.
The retail giant has also been trying to push Amazon Game Studios in the previous years beginning with the acquisition of Double Helix. The company even partnered up with Game Fly this June to bring video game streaming to its Fire TV for a subscription fee. The deal with Game Fly can be thought of as an add-on by the firm which already owns a video-game streaming company.
Twitch opened up new space for advertisement for the Seattle-based Corporation. The deal, at that time, enabled Amazon to host Twitch’s 55 million users, live each month. The user base has since grown to 100 million users per month. Billions of minutes of streaming are done on Twitch. With Twitch under its belt, it was potentially a new avenue for revenue generation. To give some perspective, an average user session lasts for 106 minutes. Moving in this space, the company has made deal with Proctor & Gamble’s Old Spice for Twitch specific advertisements this year.
Although majority of the users still hail from the gaming community, Twitch has moved into new services including streaming live concerts and hosting previews for TV shows. The streaming site hosted the preview of TBS show “King of the Nerds”. It combined with HBO to preview and host the first episode of the comedy show “Silicon Valley”. The focus remains on retaining the customer base but the company is sticking to its mantra of “experimentation” by trying new things.
Amazon already has its $99 Fire TV set-top box which played Android-based games using an Amazon controller. The move was a way for Amazon to rebrand itself as a multimedia company and not just an online retailer.
Twitch has given Amazon space in the user-generated video content where it was lagging behind Google’s YouTube and IAC’s Vimeo. Twitch provides the right platform for Amazon to market its own games in the future for free. The advertising revenue from the marketing to the growing user base of Twitch has boosted the revenue numbers for Amazon.
Twitch is the biggest live video game streaming website, which allowed Amazon to link streaming to each of its devices. It has the infrastructure to handle the load because it is well-established in the cloud services business as well. The e-commerce giant has the opportunity to integrate the live video game streaming services gained from Twitch into Amazon Prime. Prime currently offers streaming of shows and movies only.
Currently, the online retailer is facing tough competition from YouTube Gaming, which has been launched by Google to take a share in the user-generated video arena. YouTube has its own advantages moving forward. It has a 1 billion user base that will surely give it a boost against Twitch. It even has the ability to switch resolution based on the user’s internet connection, something Twitch does not have. In addition to this, YouTube even has customization options for the users.
Things will not be as rosy as they seem for YouTube Gaming as breaking the dedicated customer base of Twitch will not be an easy task. It will take a lot of effort to penetrate in the market as Twitch is the number one source for users for video game streaming. Apart from this, unlike YouTube, Twitch does not have stringent copyright policies where users run the risk of getting their favorite streaming’s removed from the platform.
A year later the acquisition is working well for Amazon as Twitch has grown by leaps and bounds and continues to do so. The user base of Twitch has increased significantly along with bringing in good business opportunities for the e-commerce giant.