Amazon Scores Game-Video Site Twitch For $970M

After months of negotiating with Google’s YouTube unit for an acquisition, popular online-video site Twitch Interactive instead was bought today by Amazon, for a reported price of $970 million. The site is only three years old, but exploded in size as a go-to place for people to watch others play and talk about videogames.

Twitch has been focused on videogaming, one of the biggest sectors on YouTube and other online video sites. The site now claims 55 million monthly users, watching 400 million hours of video posted by more than 1 million “broadcasters,” ranging from gamer pros and serious amateurs to publishers to tournaments and conferences. In its short existence, it’s quickly become a go-to site for gamers on PCs, and now the service is built into the online interfaces for both Sony’s PS4 and Microsoft’s Xbox One, making it easy for players on those next-generation game consoles to record and share their game sessions with others. Some of those gamers have become online celebrities thanks to their game-play and other videos, building audiences of millions of followers.

“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 – from The International, to breaking the world record for Mario, to gaming conferences like E3. And, amazingly, Twitch is only three years old,” said Amazon CEO Jeff Bezos in the company’s announcement of the deal. “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.”

Twitch.TV’s CEO Emmett Shear said in a blog post that the deal will allow for a better site, with greater global reach.

“We chose Amazon because they believe in our community, they share our values and long-term vision, and they want to help us get there faster,” Shear wrote. “We’re keeping most everything the same: our office, our employees, our brand, and most importantly our independence. But with Amazon’s support we’ll have the resources to bring you an even better Twitch.”

Less than a month ago, some news outlets, including some very well-sourced reporters I know, were reporting that a $1 billion deal betweenYouTube and Twitch was all but done. But that deal never materialized.

Dylan Conroy of  Channel Factory, whose company helps YouTube creators maximize their videos’ performance, said the acquisition like serves multiple purposes for Amazon, providing another way to pull YouTube talent to Amazon while chipping away at the opportunities Google has to make higher-value video content for its video unit.

“Amazon has made no secret that they plan to lure away top talent from YouTube by providing higher CPMs and a more lucrative ad share split in favor of creators, so its no big surprise that Amazon stepped in and took this deal off the table once it was whispered that google was interested. Amazon probably sees Twitch as a way to enhance its Fire TV offering as well,” Conroy said. “YouTube is winning the tentpole-event streams, with rights to Coachella, The Red Bull Stratos Jump and Presidential addresses, and Twitch would have given them a huge platform to own user-generated live video in the gaming space, but for now Amazon will dominate here.”

Digi-Capital, which advises mobile game and Internet clients, said the deal was a smart one for Amazon on multiple fronts, even as it continues to heat up the very busy mergers and acquisitions segment for games: “Twitch is a great deal for Amazon beyond a competitive win, as it accelerates both its video and games initiatives,” wrote Tim Merel, the company’s managing director. “The $970M deal pushes games M&A to $9.2B in 2014 so far, closing in on double 2013’s full year record of $5.6B.”

Merel said the main sectors where game-biz consolidation is happening include mobile ($3.4 billion), technology, including the Twitch deal ($3.2 billion), and massively multiplayer online games ($1.7 billion).

The deal will certainly beef up the Twitch technical backbone, given Amazon’s formidable S3 service. Fire TV is Amazon’s recently announced streaming-video device that competes with small TV-side devices such as the Apple TV and Roku. Unlike the others, it’s optimized to encourage people to buy more things from Amazon, even as it simplifies the consumption of many kinds of content from the company especially through its Prime service.

Prime started with free two-day shipping of all purchases. Now it includes free online access to a wide array of (typically somewhat older catalog) music, films, TV shows and books. The service had been $79 a year, but now will cost $99 a year after a recent price hike. The next step might be to layer in Twitch video and a library of free older videogames and inexpensively priced new titles, delivered online in a fashion similar to services already out there such as Gamefly and Sony’s recently launched PlayStation Now service.

Here’s all of Shear’s statement, as posted on the site’s official blog:

It’s almost unbelievable that slightly more than 3 years ago, Twitch didn’t exist. The moment we launched, we knew we had stumbled across something special. But what followed surprised us as much as anyone else, and the impact it’s had on both the community and us has been truly profound.

Your talent, your passion, your dedication to gaming, your memes, your brilliance – these have made Twitch what it is today. Every day, we strive to live up to the standard set by you, the community. We want to create the very best place to share your gaming and life online, and that mission continues to guide us.

Together with you, we’ve found new ways of connecting developers and publishers with their fans. We’ve created a whole new kind of career that lets people make a living sharing their love of games. We’ve brought billions of hours of entertainment, laughter, joy and the occasional ragequit. I think we can all call that a pretty good start.

Today, I’m pleased to announce we’ve been acquired by Amazon.We chose Amazon because they believe in our community, they share our values and long-term vision, and they want to help us get there faster. We’re keeping most everything the same: our office, our employees, our brand, and most importantly our independence. But with Amazon’s support we’ll have the resources to bring you an even better Twitch.

I personally want to thank you, each and every member of the Twitch community, for what you’ve created. Thank you for putting your faith in us. Thank you for sticking with us through growing pains and stumbles. Thank you for bringing your very best to us and sharing it with the world. Thank you, from a group of gamers who never dreamed they’d get to help shape the face of the industry that we love so much.

It’s dangerous to go alone. On behalf of myself and everyone else at Twitch, thank you for coming with us.

Here is Amazon’s release on the deal:

Amazon.com, Inc. (NASDAQ: AMZN) today announced that it has reached an agreement to acquire Twitch Interactive, Inc., the leading live video platform for gamers. In July, more than 55 million unique visitors viewed more than 15 billion minutes of content on Twitch produced by more than 1 million broadcasters, including individual gamers, pro players, publishers, developers, media outlets, conventions and stadium-filling esports organizations.

“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 – from The International, to breaking the world record for Mario, to gaming conferences like E3. And, amazingly, Twitch is only three years old,” said Jeff Bezos, founder and CEO ofAmazon.com. “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.”

“Amazon and Twitch optimize for our customers first and are both believers in the future of gaming,” said Twitch CEO Emmett Shear. “Being part of Amazon will let us do even more for our community. We will be able to create tools and services faster than we could have independently. This change will mean great things for our community, and will let us bring Twitch to even more people around the world.”

Twitch launched in June 2011 to focus exclusively on live video for gamers. Under the terms of the agreement, which has been approved by Twitch’s shareholders, Amazon will acquire all of the outstanding shares of Twitch for approximately $970 millionin cash, as adjusted for the assumption of options and other items. Subject to customary closing conditions, the acquisition is expected to close in the second half of 2014.