Why Amazon is paying nearly $1 billion to acquire Twitch


Twitch, the streaming site where users can watch other people play video games in real-time, is being acquired by Amazon.com for approximately $970 million in cash.

The purchase signifies the growing power of video game culture--which has spawned everything from tournaments to celebrity players--as well as Amazon's increasing ambitions in the media world.

"“Broadcasting and watching gameplay is a global phenomenon and Twitch has built a platform that brings together tens of millions of people who watch billions of minutes of games each month," said Amazon.com chief executive Jeffrey P. Bezos -- who also owns The Washington Post -- in a statement Monday afternoon. “Like Twitch, we obsess over customers and like to think differently, and we look forward to learning from them and helping them move even faster to build new services for the gaming community.”

The report was surprising given that there has been talk for months that the search firm Google had agreed to purchase Twitch for $1 billion.

Twitch is a service designed to let video gamers broadcast their games in real-time and has grown enormously popular in the past few years. According to a recent article by the Wall Street Journal, Twitch ranked fourth in terms of peak Internet traffic in the U.S. -- ahead of Hulu.

How is that possible? For many, the idea that anyone would want to watch other people play video games may seem strange. But for many fans, it's not that different from watching the broadcast of a sports game or poker match. "Esports," the name for this type of competitive video game play, is already a major industry in places such as Korea and Germany, and has grown enormously in the past several years. During a big tournament, as many as one million people have tuned in at the same time on Twitch.

The most popular video games that people like to watch others play are ones in which players battle each other in discrete matches, such as "League of Legends," "Call of Duty" and "Starcraft."

There are gaming tournaments, in which players compete against each other for prize money -- The International, an annual e-sports tournament hosted by Valve for its "Defense of the Ancients" title, raised nearly $11 million in prize money  from contributors for this year's prizes. Professional gamers and professional game commentators, such as  Justine Ezarik and Manuel Schenkhuizen, have become celebrities in their own rightAt least one college in Illinois has started offering scholarships for students who can play games competitively.

Twitch has become the de facto home for online broadcasts of professional events, as well as a platform for amateurs to stream games via their home computers or gaming consoles. Viewers join the amateur players for live streams, sometimes to chat with others on Twitch about playing styles -- a sort of amplified version of sitting on the couch and watching friends play games.

Rumors first surfaced that Google was close to a deal for the site in May, when Variety reported that the two firms had reached a preliminary deal. A subsequent report from VentureBeat's Dean Takahashi led many to believe that Google's Twitch acquisition was a done deal.

Picking up Twitch is a coup for Amazon, which has competed heavily with streaming video providers such as Netflix and Hulu for TV shows and movies. The company has been expanding its media ambitions, announcing earlier Monday that it has given a greenlight to five pilots for children's shows, adding to its roster of original shows. The firm recently disclosed it expects to spend at least $100 million on producing pilots and new series this quarter.

But --until last month-- Amazon had not hosted any of the user-generated video that dominates sites such as Twitch and Google's YouTube. The company recently started hosting more YouTube-style videos on its site to advertise its products, including how-to videos on product pages for items such as curling irons. The firm has also taken steps to increase its presence in the gaming world, incorporating gaming features into its set-top video box, the Fire TV. The company also has its own in-house video game studio, which releases games for the Fire TV.

Michael Frazzini, vice president of Amazon Games, said in an interview with The Washington Post that the Twitch acquisition will be a boon for the company's efforts in gaming. "We have a lot of shared points of view about where this could go," he said.

Twitch chief executive and co-founder Emmett Shear said that Amazon's willingness to let him remain chief executive and run Twitch independently was a major reason that he agreed to the deal.

"We wound up going with Amazon because the premise of the deal is that we are fully independent," he said. "That was not insignificant for me." Shear also said that Twitch could also learn a lot from the Amazon's cloud computing and advertising departments. "This can accelerate what Twitch is doing," he said.

Hayley Tsukayama covers consumer technology for The Washington Post.
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