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Why did Amazon buy Twitch?

Amazon’s $970 million acquisition of Twitch last week sent the industry into a furor of surprise and speculation regarding why the purchase was made. Amazon’s press release regarding the acquisition mentions their and Twitch’s shared belief in the “future of gaming,” which is indeed evidenced by their in-house development of several Facebook games, and the acquisition of studio Double Helix Games. Additionally, Amazon is the second-largest online distributor of video games, below Steam. The purchase makes sense for Amazon as they now have a new advertising outlet for their gaming products in services used by gamers. They will embed themselves and their services in gaming culture, and likely use their massive capital to continually improve Twitch’s twitch.tv product.

For those who don’t know, Twitch is a video game streaming service used by millions of gamers to broadcast and watch videos of competitive games like DotA 2, League of Legends, CounterStrike: Global Offensive, and Hearthstone: Heroes of Warcraft; among others. Others also use the site to watch speedruns of classic games like Super Mario 64 and Legend of Zelda: Ocarina of Time. Last May, Google reportedly offered Twitch $1 billion for the company, which they ended up backing out of when concerns of antitrust laws arose. Google owns YouTube, and if they also owned Twitch, they’d control the two biggest video sharing sites on the Internet by a huge margin. Naturally, Google worried about the ramifications of the deal if federal regulators put a stop to it, and because they couldn’t agree on a breakup fee, the deal was taken off the table.

According to Twitch itself, the site was exploding in popularity faster than they could upgrade their infrastructure for hosting video content. During its peak hours, the site drives more traffic than Facebook and Amazon. Twitch raised $20 million in 2013, and was offered more by its investors, but would only be able to sustain its growth via a buyout from a major corporation. Amazon may also be able to help deal with Twitch’s growing torrent of copyright claims generated by users streaming content with music in the background.

An immediate benefit of the acquisition will be to the quality of the streaming video on Twitch, thanks to Amazon Web Services. AWS is Amazon’s web hosting product, one of the biggest in the industry. With this kind of technological backing behind them, Twitch will see an increase in the quality and buffering times of videos. Amazon will also be able to integrate referral links into the service, which will allow streamers to collect a percentage of the revenue from Amazon products they link to on their channels. For example, if there was a streamer who uploaded videos of Street Fighter or a similar fighting game, they could link to the Amazon page for their arcade-style gamepad of choice.

In general, reactions to the sale have been positive – if only due to gamers being happy that it wasn’t to Google. YouTube has a tendency to make changes to its site on a whim – like requiring a Google+ account to log in, or changing the entire design – that are not always to the liking of its users. Since YouTube is the Internet’s biggest site for uploaded video with little competition, Google is not always prone to responding to users’ feedback immediately. Most people have been warmer to the sale as it is now, since Amazon doesn’t currently have a dog in the fight, and their bolstering of Twitch could make it a serious competitor to YouTube in both the streaming video and recorded video arenas.

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