Amazon buys Twitch to make its name in video games
Amazon聽is hoping to become the ESPN of video games.
The e-commerce giant is buying streaming platform聽Twitch聽Interactive for $970 million in cash as it seeks to take part in video gaming's growth as an online spectator sport.
Twitch聽is a multi-channel online network built for a generation of people who not only enjoy playing video games, but find it entertaining to watch others who might impart tricks and tips for excelling at their favorite games.
Amazon's聽purchase is an acknowledgment that gameplay video feeds are increasingly lucrative.聽Twitch聽had 55 million unique visitors in July, up from 20 million in 2012. Most visited the Twitch.tv website to watch other people play live or recorded games 鈥攃ompetitions interspersed with advertising.
Digital video advertising in the U.S. is expected to reach $5.96 billion this year, according to eMarketer, up 41.9 percent from 2013.
"Broadcasting and watching gameplay is a global phenomenon and聽Twitch聽has built a platform that brings together tens of millions of people who watch billions of minutes of games each month," said聽Amazon聽CEO Jeff Bezos in a statement.
The deal is the latest example of聽Amazon聽expanding into new commercial arenas. It introduced its own smartphone, the Fire, this month. Earlier this summer, it added same-day delivery, a set-top video streaming device to its list of services for members of Prime, its $99 annual loyalty program.
Amazon聽already has an in-house gaming studio that makes games, and its Fire TV set top box was designed to attract gamers.
Twitch聽CEO Emmett Shear said聽Amazon聽is a good fit because "they believe in our community, they share our values and long-term vision."
Google had been in talks to buy聽Twitch, but no deal materialized. Forrester Research analyst James McQuivey believes Google might have been a better fit for聽Twitch.
"Twitch聽will be a harder asset for聽Amazon聽to use," he said. "It doesn't have the kind of video streaming audience that Google's YouTube does."
However, McQuivey added that聽Amazon聽is trying to own more of its own content rather than simply selling others' and聽Twitch聽could help the company do that.
"(Twitch) captures people's attention for hours a week and it also creates a product tie-in opportunity that聽Amazon聽can capitalize on in a way that Google could not," he said.
In a letter addressed to聽Twitch's聽users, Shear emphasized聽Amazon's聽willingness to allow the gaming service operate independently as a key reason for the deal coming together. It's not clear whether聽Twitch聽would have been given as much autonomy had it been purchased by Google, given the leading role that YouTube already plays in online video.
Google declined to comment on聽Twitch's聽sale to聽Amazon.
Seattle-based聽Amazon's聽purchase of聽Twitch聽is set to close in the second half of 2014.
Twitch, based in San Francisco, spun out of Justin.tv, a quirky service that revolved around a video feed tracking the daily activities of co-founder Justin Kan. The focus shifted to live video for gamers in 2011, a move that has turned聽Twitch聽into rapidly growing phenomenon.
In July, users viewed more than 15 billion minutes of content produced by more than 1 million broadcasters, ranging from individual gamers, pro players, video game publishers, developers and others. The company does not release revenue figures, but in September 2013 it received a $20 million investment from investors including software company Take-Two Interactive and venture capital firms Alsop Louie Partners and Bessemer Venture Partners.
