Monday, August 25, 2014, 5:26 PM ET|Posted by Will Richmond
Amazon will acquire Twitch, the live-streaming video game platform, for $970 million. Until very recently Google was heavily rumored to be acquiring Twitch. Twitch is Amazon's 2nd-biggest acquisition ever, after its $1.2 billion purchase of Zappos in 2009. Twitch enables users to live-stream and record themselves playing video games, which tens of millions of monthly visitors watch.
Twitch is Amazon's biggest investment in online video to date and follows other video initiatives including Prime Instant Videos, an escalating slate of original programs, numerous high-profile licensing deals (including for various HBO programs and for the PBS drama "Downton Abbey") as well as the recent launch of the Fire TV connected TV device.
Twitch is also the biggest move for Amazon to date into online gaming, an area the company has been aggressively pursuing since opening its own gaming studio in 2012. Gaming has been promoted heavily in its tablets, Fire TV and Fire Phone as a differentiator.
Longer-term, one way to think about the Twitch deal is that it could become for Amazon what YouTube now is for Google - the company's massive anchor in online video advertising. With Netflix thoroughly dominating the premium OTT market (albeit with Amazon trying hard to catch up), Amazon is making a bet that Twitch's combination of UGC, prosumer and premium content focused on the exploding esports gaming vertical could be its on-ramp into online video advertising.
Twitch's numbers are already sizable - according to its own research, in 2013 it attracted 45 million monthly viewers who watched 12 billion minutes per month - both double vs. 2012 (in July '14 these were up to 55 million viewers and 15 billion minutes). Viewing in 2013 was 106 minutes per day and importantly 68% of its viewers said they have decreased time spent watching TV to focus on gaming entertainment. Twitch has developed an ESPN-like fan following but without having to pay billions of dollars in licensing fees.
Twitch provides Amazon a springboard for its nascent online video advertising business as well as another hook to lure buyers to its portfolio of devices. And just as Google invested in YouTube, continuously improving the experience for both content providers and users, expect Amazon to do the same for Twitch.
While Amazon will continue its original programming and TV licensing agendas, gaming and advertising have both moved to the front burner with the Twitch deal which is yet another example of how the biggest online players continue to recognize the power of online video and are jockeying for position.
(Note, the VideoNuze daily email is being sent in the afternoon this week as I'm traveling outside the U.S.)