Amazon pulled off a masterstroke when it purchased video game streaming platform Twitch for $970 million in August 2014. It has gone on to cement its status as the world’s number one streaming service for gamers over the past five years and it is now worth close to $4 billion.
Investopedia recently called it “Amazon’s best-kept secret”, but it is a household name among the large, passionate and ever-expanding gaming community. In the second quarter of 2019, Twitch users watched 2.7 billion hours of content, with Fortnite, League of Legends, Grand Theft Auto 5, Dota 2 and CS:GO proving the most popular.
A Phenomenal Rise to Prominence
It has come a long way since Justin Kan and Emmet Shear launched Justin.tv back in 2007. It allowed visitors to stream content across a number of categories, and gaming proved to be the most popular, so the company spun the section off as Twitch.tv in 2011. By the end of 2013, Twitch has 100 employees and it saw off competition from Own3d.tv to become the undisputed world leader for streaming video games.
By 2014, it was the fourth largest source of Internet traffic during peak times in the U.S., behind only Netflix, Google and Apple, and Amazon decided to snap it up. Shear continues to head up Twitch and it now has more than 1,000 employees, operating as a subsidiary of Amazon in San Francisco. It remains the market leader by a considerable distance, but it still faces a battle to hold onto that status in the years ahead.
YouTube Gaming Grows in Popularity
Its biggest competitor is YouTube. The Google-owned platform was apparently in advanced talks to buy Twitch for around $1 billion before Amazon swooped in and purchased it. Since then, YouTube has developed its own platform called YouTube Gaming, which has emerged as a credible rival to Twitch.
YouTube is the most popular streaming platform in the world for every category apart from gaming, so the team is bound to be hell-bent on usurping Twitch. YouTube Gaming Live reached all time highs for hours watched, streamed and viewers per channel in Q2 2019, according to Stream Labs.
Visitors to the platform racked up a total of 701.6 million during the three months to June 30, 2019. That is a 10.4% increase on the 635.4 million it secured in the previous quarter, which is a hugely impressive performance for what is now an established streaming service.
Has Twitch Peaked?
During the same period, the number of hours watched on Twitch decreased by 56 million to 2.706 billion. It amounted to a decline of just 2%, but it marked the end of a long period of growth for the platform, suggesting it may have peaked. Fortnite’s diminishing popularity could have accounted for the decline, or people could simply be migrating to YouTube.
Concurrent viewership dropped 3% to 1.24 million viewers on the previous quarter, while 4.8 million channels streamed on Twitch, almost 1 million fewer than in Q1. Meanwhile, concurrent viewers at YouTube Gaming rose 9% to 323,000, and there were 1.17 million channels streaming.
Twitch is roughly four times the size of YouTube Gaming right now, but its rival is ambitious. Some streamers prefer it, because it gives them the opportunity to convert regular YouTube users – of whom there are 1.3 billion – into fans of their channels. A number of them also have issues with the content filter on Twitch, so they choose YouTube instead.
Others have issues with Twitch’s tendency to display channel in descending order of the number of viewers watching the stream, saying it makes it hard for upcoming streamers to gain traction. The lack of thumbnails is another issue.
A Lucrative Venture
However, Twitch is more established in the world of gaming, and it still houses most of the key influencers. Both platforms allow streamers to earn ad revenue from pre-roll ads displayed before or during their streams, and they compete to keep the leading channels on their platforms.
Twitch has recently beefed up its IRL section, but it still massively specializes in gaming and it houses most of the leading influencers. It tends to pay a lot more than YouTube due to the subscription model it uses. Twitch subscribers bring in $5, $10 or $25 per month, of which Twitch takes 50%, leaving $2.50-$12.50 for the channel. If you have millions of subscribers, that really adds up. Some top streamers have even been able to negotiate a higher percentage.
Its attractiveness to the most popular streamers should see Twitch hold onto its crown for some time yet. It also needs to compete with YouTube for the media rights to stream leading esports tournaments. It January 2018, it signed a $90 million deal to broadcast Blizzard’s Overwatch League, which is soaring in popularity, as these esports betting markets show. More deals like this covering the likes of LoL, Dota 2 and CS:GO would help it preserve market share.
Smaller Rivals Emerge
Elsewhere, competition comes in the form of Mixer. It has just 119 million hours viewed in Q2 2019, but that was a huge year-on-year increase of 357%, and also up 32% on Q1. It is rapidly growing, and it has built up a dedicated user base, so it could emerge as a more viable challenger to Twitch in the years ahead.
Smaller offerings include DLive, a streaming platform that uses blockchain technology and racked up 34.2 million viewing hours in Q2. It is the exclusive lives streaming site for the immensely popular PewDiePie, and it is also gaining serious traction.
Facebook is also trying to muscle into the picture with Facebook Gaming Live. It launched a dedicated home for gaming content on the Facebook app in early 2019, allowing users to find and follow videos from top streamers, esports organizations and game publishers.
Over time, it promises to recommend streamers and help its users discover new channels based on the games and content they already follow. It has more than 2 billion active users, so it has a huge opportunity to convert them.
The video gaming industry is tipped to be worth $300 billion by 2025 and streaming will be integral to its growth. All the big tech firms, from Google to Facebook, are beginning to vie for market share, and Twitch will have its work cut out as it bids to hold onto the top spot.