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Why Amazon’s $1B Twitch Buy Makes More Sense Than Its Fire Phone


Why Amazon s 1B Twitch Buy Makes More Sense Than Its Fire Phone Business WIRED

Source: http://www.wired.com/2014/08/why-amazons...

Amazon wants to own all your screens. That’s why it sells Kindle tablets, the Fire phone, and the Fire TV set top box. And it’s why the company just inked a nearly $1 billion deal to Twitch, a company that lets people broadcast their videogame play over the net.

As random as the Twitch buy may sound to the uninitiated, it makes at least as much sense—and probably a lot more—than Amazon building and selling its own phone. Apple and Google have already won the battle for the small screen. The same can be said for tablets, with the exception of the Kindle for e-reading. But the screen that gamers use—the original TV—is still contested territory. The battle for the living room is very much up for grabs. And that’s where Twitch comes in.

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As non-gamers must be constantly reminded, the gaming industry is bigger than Hollywood:

Fans of games are often more passionately engaged than the biggest devotees of movies and TV, and they may well spend even more time sitting in front of the big screen. Twitch gives Amazon the power to command their attention even when they’re not playing games themselves.

Apparently, Google saw the same opportunity. The deal with Amazon comes after what seemed to be a lengthy courtship between Twitch and Google, which is battling Amazon on every front to own a greater share of the world’s screen time. But there are a few differences here. Google’s play for Twitch would seem to have been an attempt to expand its ad business into yet another platform. For Amazon, the rationale is a little more complicated.

Actually, this is quite brilliant.

Amazon does have an ad business, but it’s a small sideline compared to its main role as a retailer. Recently, shareholders have punished the company amid claims that it’s not focusing enough on this core function. It’s hard to imagine that $970 million spent on game broadcasting will assuage that concern. But a captive audience is a great way to build a constituency of potential customers. However Amazon plans to leverage that attention, you have to own that attention first. And if you doubt the port of game-play videos to do that, you’ve never watched a little kid discover Minecraft clips on YouTube.

Twitch has built an audience of 55 million viewers at last count, viewers who have turned top gamers into celebrities and video-game spectating into big business. And its reach is global. Owning Twitch puts Amazon in the living rooms of young people around the world, extending the reach it already enjoys through it’s Prime Instant Video.

Very insightful of Jeff Bezos:

"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 CEO Jeff Bezos. "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."

Google was unable to close the deal because of the breakup fee:

Google was concerned about potential antitrust issues that could have come with the acquisition. The Mountain View, Calif. company already owns YouTube, the world’s most-visited content streaming site, which competes with Twitch to broadcast and stream live or on-demand video game sessions. One source noted that because of the concerns, Google and Twitch could not come to an agreement on the size of a potential breakup fee in case the deal did not go through.

...

Neither Twitch nor Google ever publicly confirmed that it was in acquisition talks, but various publications confirmed the deal was pretty much sealed last month. Monday’s reports suggest that was far from the case, as Amazon looks to add to a growing media empire that it’s established with several online television shows and a set-top content streaming box, Fire TV, launched in April.

Amazon is not known for making large acquisitions and a deal for Twitch could rank as largest in its 20 year history. That record was held previously by the company’s purchase of Zappos, which came in at around $850 million at the time the acquisition was announced in July 2009. With add ons, Amazon could potentially pay up to $1.1 billion for Twitch when the deal closes, which is expected to happen in the second half of 2014.

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