Amazon buys Twitch for $970 million, why?

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I'd like to look at a bit of news.

On Monday, August 25, Amazon, the world's largest online retailer, hoisted the hefty sum of $970 million onto Twitch, a live streaming video platform, figuratively burying it in bank notes.

It is both easy and fruitless to focus on anything before the facts in a case like this, so let us get the facts straight.

Amazon.com is an international electronic commerce company. Launched way back in 1995, today they purvey everything from books and DVDs to jewelry, home goods, and apparel. Moreover, Amazon.com produces and sells consumer electronics including but not limited to the Kindle, Fire tablets, and more recently the Fire Phone. Over the course of the last fiscal year Amazon.com has seen ubiquitous growth across the board. The site boasts an international resume with separate retail websites for the USA, UK, Germany, China, India, and eight others alongside the intention to add at least three more. Suffice it to say that the retailer is very, very big and their wares are very, very diversified.

Let us turn our attention to Twitch.tv. Spawned somewhere in the rather recent past known colloquially as the year 2011, Twitch was originally the gaming-focused off-shoot of Justin.tv. In 2014, after Twitch had eclipsed Justin.tv in popularity, the company re-branded itself as Twitch Interactive. With average viewers per month up around 45 million, Twitch.tv is one of the top five sources of internet traffic as of last spring.

But the story of Twitch's growth is a very short one. There are really just two bright spots: first, in February, a stream known as "Twitch Plays Pokemon" went viral as it attempted to complete Pokemon Red via a crowdsourcing control mechanic (I must admit that the idea was clever and rather fascinating), and second, in July, electronic music act Steve Aoki live-streamed a show using the service.

The fact that neither of these events would be very noteworthy in a company which boasts two decades of success serves to illustrate the adolescence of Twitch Interactive. It is a young company, a growing company, but is it already a billion dollar company? My feeling is no, so why should Amazon.com think that it is?

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For one thing, Amazon aren't the only ones who seem to have taken an interest in the live-streaming upstart. Recently, the rumor had been that Google, through YouTube, was looking to acquire Twitch for a cool billion. And not so long ago we saw Facebook drop nearly $2 billion to acquire Oculus VR, a virtual reality technology company developing the much-praised Oculus Rift, a head-mounted display for immersive virtual reality. Importantly, however, is that while Oculus VR is making hardware under the banner of a software company, Twitch is a service platform under a retail-based company. In essence, these two moves are being made in opposite directions. What is true in both cases is that the growth of the gaming industry is something that other industries want to get their hands on.

It's a bit like trying to fit everyone in the room under a blanket, and it's likely that whoever can pull the hardest will sleep most comfortably.

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What Amazon has to offer Twitch is obvious--international infrastructure and the notoriety to raise their platform. Amazon Instant Video is out to compete with Netflix, so why not pick up Twitch and raise some hell for YouTube as well? It certainly fits with Amazon's tendency for diversity and competition. But competing in an industry you don't already belong in is risky--just look at Amazon's Fire Phone, for which sales were recently predicted by The Guardian to be around just 35,000 units.

Amazon has shown an interest in gaming for the last few years. In 2012 they created their own in-house studio. The company's Fire TV has a spattering of games to choose from, and they have already tried their hand at putting up some Facebook and mobile game fodder. So they're not entirely new to the idea, but they are  far from being thought of as more than a place to get your games from. Becoming a place you take your games to is a steep hill to climb.

But now let us step away from the facts and into the foggy world of conjecture.

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What we know is that a big guy is giving a little guy lots of money. What we do not know is "why?".

Twitch does not seem like a great choice if Amazon is looking to turn over a quick dollar. Most of what is available on the site is free--watching streams, creating streams, commenting, participating, and so on. The site can run advertisements and sell premium memberships, but that doesn't really set it apart from YouTube, where serious content-producers are more likely to gravitate as they are able to cut themselves in on a bit of the profit. What I have seen more than anything on Twitch are streams used as gateways onto YouTube. "Watch an hour of our live content here and you'll want to watch two hours of our archived content over on YouTube" seems to be the general idea behind most of the streamed content. So there isn't any ground being gained by Amazon against Google/YouTube on that front, and the fastest way of breaking into something new is by stealing things away from those who already have them.

What small gains there are in advertising are great, but they are not the source of Twitch's growth and, for Amazon, they must envision some other kind of growth to invest so heavily in such a young company. While Twitch would be happy to ride on Amazon's massive coattails up to the front page of Prime Instant Video, what is the boon to Amazon?

If Amazon were to expand the platform for its own uses, as in exclusive features for its members or strengthening it's customer service capabilities and infrastructure, a myriad of benefits would seem to appear for the giant. But can we really have forgotten so quickly about Justin.tv? What Twitch Interactive quickly proved was that the room for growth in live-streaming services is in the gaming industry. While there may be benefits outside of that industry, it seems that the surest return on Amazon's investment lies in the same direction Twitch has already taken.

A quick way to turn investment into profit would be to turn on the exclusivity. Amazon has plenty of proprietary offerings beyond which they can close doors and throttle users. This would, rather quickly, ruin the service for the majority of users and streamers. Twitch is the biggest, best platform dedicated to live-streaming games at the moment and Amazon would be foolish to tarnish that title.

To my mind, Twitch was just the streaming service out in front of the pack of imitators still readying themselves to follow. With Amazon's investment they've been offered a turbo-boost. The first orders of business really only need to be two-fold. First, make streaming easier. In my experience, streaming puts such a load on my bandwidth that I'm left at a significant disadvantage in connection quality (as well as FPS). Making the whole process lighter and simpler would encourage greater participation from those who already know about the platform. Second, their new capital must make a difference in expanding the salience of their site amidst the milieu. It would be irresponsible and  irrevocable to sit back and wait for another stream to go viral like Twitch Plays Pokemon did. If that happens, great, but it's not Twitch's job to sit back and wait for it to happen again, it is their job to make all of those users who visited to see what the hubbub was about want to come back again and see what's new.

I'm not much of a Steve Aoki fan myself, but I do think hosting live events like that is a good way forward for the company. I want to see the comic conventions, the gaming conventions, the press conferences and everything else that has grown up around gaming culture live and in high-definition. I want to see a thousand channels streaming live content that interest me in a thousand ways. On one screen I want to see a symphony orchestra playing music from classic games and on another I want to see the Starcraft II tournament finals.

Twitch is getting the better end of the deal. They now have capital to grow quickly and the partnership to keep them ahead of the imitators as they globalize. For Amazon, they have to know that their newest asset isn't ready for the big-time yet. They have to know that Twitch is a company barely out of its shell, but that with some tender nursing it will soon be ready to join the hunt.

Just like this little cutie-pie.

EA's Bad Business

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One of the first steps in understanding the gaming industry is knowing the players. I remember when I first began to recognize certain developers as sure signs of a game's quality, and, in part, it has been through the development of that knowledge that my understanding of the industry has grown.

Electronic Arts is one of the best known and most vilified publishers making games today. Within the gaming industry and the gaming community there is no company which is regarded with greater scorn and outrage. And yet, in spite of being named "Worst Company in America" by The Consumerist in 2012, Electronic Arts has not found itself being pushed out of the market by conscientious consumers. In fact, they have continued to grow into one of the industry's largest publishers.

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I find  myself to be one of those disgruntled by their business practices. Rather than elude to that displeasure with snarky gibes, I will directly rant about some of what I find unappealing.

When I say that customer service is not a focus of the company, I do not mean to point at anecdotal evidence posted anonymously to web forums. What I do mean is that the company is clearly more focused on pleasing their investors than their customers. I am a firm believer in good customer service. It is important that business be conducted between people and that those people feel a personal obligation to be good to one another. The best business decision is often not the best human decision, but gains in social well-being have a better kind of value than simple profit. EA's propensity to think with their wallet has, time and again, raised the ire of the gaming community.

Take their recent release, Titanfall, for example. The game was sold for top dollar and, meanwhile, EA tried to snag $20 dollars more of pure profit by offering a "Digital Deluxe Edition" which included a "Season Pass" to future and, as yet, unannounced downloadable content packages. This meant, essentially, paying EA more money in order to receive absolutely nothing of value in return. Anyone who has stayed awake in a basic accounting class has an understanding of the time-value of money, but let me explain it quickly here. The time-value of money is the basic principle to explain why $20 today is worth more than $20 dollars a year from now. In short, it's better to have money right now than it is to have money at some future time. By selling something they haven't made yet, EA can cash in on quick profits and then squeeze the most value-for-dollar out of the deal while the consumer is left without recourse. To make matters worse, the "digital" part of the "Digital Deluxe Edition" means that there is no physical hardware to produce or ship, they merely lend you the pleasure of downloading the software from their servers at the cost of just fractions of a penny.

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Now, as an investor, if you see a company selling a product for top dollar plus a premium while only spending a few cents to take that product to market, you see a pretty savvy investment. The fact that EA has the wealth to run large-scale advertising campaigns means that, when paired with a great developer, they can bring a pretty good game to massive popularity. And when you've done your research and found out that that company sells millions and millions of copies of its product, well, let's just say you go shopping for a bigger wallet.  As a consumer, on the other hand, you see yourself being treated like a child's piggy bank--heartlessly smashed and taken for every last cent you own.

But EA have found even more devious ways to hide fees and charges in their products. They take parts of the game and hide them behind paywalls and in pre-order exclusives. Look at Star Wars: The Old Republic, if you'd like an example. The myriad ways in which the game is locked down for those "free-to-players" to whom the game is advertised is frankly astonishing. I have found myself disgusted on multiple occasions by the nooks and crannies which the game gouges the player for (or, rather, the payer). On the one hand, if you are a subscriber to SWTOR, the game is brilliant. On the other hand, if you want to try the game before you buy into it, you'll leave with only a taste of what could have been. It has created a lose-lose scenario where there needn't be one; the player loses out on what truly could be an immersive, exciting experience, and the game makers lose out on a possible subscription. And if you're still not convinced, look at Mass Effect 3. An entire character is missing from the game for those not willing to cough up their cash early--and he's one of the most interesting characters you'll encounter across the three titles (currently) in the franchise.

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EA is beholden to their shareholders before their customers. They make decisions on that line even when it means pushing a product into the market before it is ready and in spite of the desires of the artists crafting that product. They take the art away from their artists. They change the development goals to suit their marketing strategies.  EA acquires intellectual property assets and makes drastic changes, betraying the desires of the fans. Regardless, it is these fans to whom the title will be marketed and EA reaps the benefit of their highly desirable word-of-mouth advertising. They restrict digital transactions through their PC game platform, Origin, which has been found to have dubious tracking software that surveys the user's online activity. And one more thing, they don't make single player games anymore--everything is online, everything is multiplayer, and nothing feels connected to the innovation and experimentation that has brought the gaming industry to where it is today.

And yet, in spite of all of this, I do not completely hate the company. In an industry which is growing as fast as the gaming industry has been, and within worlds of "good guys" and "bad guys", there will always be a villain. There will always be something, somewhere, cashing in on the growth for all that it's worth. EA, for all their indecent practices, is a legitimizing force in the gaming industry. Pushing sequel after sequel, unoriginal idea after unoriginal idea, puts games on the same plane as Hollywood movies. It means the market is not starving, is not shrinking, and is impossible to ignore. It puts controllers in the hands of the young and the old alike and, whatever their opinion, it makes them acknowledge the medium--and that means legitimacy, which is something mere dollars cannot buy.

So, the moral of the story is this. Let EA make games for everyone else. Let them sell Mom and Dad on the latest VR system. Let them rot the brains of the young with flashy images. Let them be the villain, and while they are busy raking in their money, keep your eyes open for the heroes. Focus the power of your own entertainment budget on the companies, games, and most of all on the people who deserve it. It isn't easy, finding games worth your time and money, but that's why I make these posts. That's what this blog is here for--to bring you the games you won't find on your own, that you won't see advertised on television or in ads of Facebook. I'm looking for the diamonds in the rough, and if you are, too, then I'm sure we can find something worth putting the power of our dollars behind.

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Smite Gameplay

It's been too long since my last post, so here's a gameplay video I made last night.


I didn't talk much during this game in spite of being in chat with a few friends. It all seemed to work out pretty well, though. My team was able to find my heals and I was assisted well enough to escape from many tough situations. Maybe that was a bit of luck, but I think the other team was having some communication problems as well.

My favorite part of this game was actually the music that played. It's always nice to have a playlist you've made seem to work, but in this match it seemed to match the frenetic pace of some parts and the quiet lulls in others.

I seem to have good games when I play Ra. His MP5 is strong enough that you don't need much more than a rank 1 mana heal and some cooldown reduction. He makes for a very fun god and a great choice for beginners--just remember, your #3 is a heal, not a damage move, so use it like one!

In other Smite-related news, Hi-Rez have announced the game for Xbox One. My hope is that the added publicity and (hopefully) marketing budgets can bring the game to a wider audience.

I'll be back with another post soon.