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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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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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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.
