In a recent interview with ex- Dhingana co-founder and VP of emerging markets at Rdio, Snehal Shinde shared that the future is all about streaming whether it is video, music or games. The recent buzz of Google’s YouTube reaching a deal to buy Twitch, a popular videogame-streaming company, for more than $1 billion seems to be a move in a similar direction.
But in another news it is being shared that the two parties are merely in “early talks,” and not necessarily close to an agreement yet. Neither Google nor Twitch are commenting on the potential deal but the deal has been framed as a marriage that makes sense. The deal is being compared to the Facebook-Instagram deal. That is: Google — specifically YouTube, in this case – is Facebook. And Twitch is Instagram.
Kill the competition
According to Quartz, last year, some 15 million people watched Major League Baseball’s World Series. More than twice as many watched the Season 3 World Championship of League of Legends, a multiplayer online game set in a fantasy world, on Twitch. Today Twitch receives some 45 million unique visitors every month (on par with some of the largest news websites), who watch a combined 13 billion minutes of gameplay.
It was obvious that Twitch - “ESPN of video games” which raised $35M in start-up cash just a few years ago is something of a monopoly in the livestreaming space. YouTube acquired by Google in 2006 for $1.65 billion is witnessing 45 million monthly users, with more than 1 million members who upload videos each month, has also developed their own livestreaming technology.
YouTube has been offering gamers a chance to watch other gamers play games for a while, a service similar to Twitch. And it has proven it can do live streaming video at a very large scale, too.
What seemed to be another market competition building up, Google possibly has decided to kill it by initiating talks of a buy out with Twitch; similar to what Facebook did with Instagram in 2012, where an established giant snapped up a fast-growing startup it saw as a potential competitive threat.
Growth of Twitch
San Francisco-based Twitch was launched in June 2011 by Justin Kan and Emmett Shear, co-founders of Justin.tv, one of the first websites to host livestreaming user-generated video. Twitch lets users upload and watch free, live gameplay videos that can be streamed from Microsoft Xbox One and Sony PlayStation 4 consoles, and also sells a $9 monthly ad-free subscription and subscriptions to individual channels for about $5 per month. 300,000 of its viewers are paying subscribers to at least one channel.
According to the company Twitch’s audience is more than twice the 20 million unique visitors YouTube recorded in 2006. Twitch also claims to have more than 45 million monthly users, with more than 1 million members who upload videos each month. It also has deals to distribute shows from partners including CBS Interactive’s GameSpot, Joystiq and Destructoid.
Despite not being well-known beyond gaming circles, Twitch already pushes more traffic during its peak hours than titans like Facebook and Amazon. Twitch generates more traffic than HBO Go in the United States and has tripled the amount of bandwidth it uses in the past year, according to Sandvine, a networking-equipment company.
“To be quite honest, we can’t keep up with the growth,” Twitch marketing VP Matt DiPietro told The Verge last year, adding “That’s a good problem to have.”
Twitch - interactive game streaming social network
But it seems that live is not the only real focus of YouTube.
Over time Twitch has grown fast when it got picked up by serious players using it for competitive “eSports” matches. The ability to broadcast directly to Twitch from both the Xbox One and PlayStation 4, and the company’s recent experimenting with mobile game streaming as well has made it popular.
Twitch says about a million of its users are also broadcasters – that are made for and watched by much smaller audiences.
Besides Twitch has groomed itself as a potential hub for “interactive game streaming” experiments like Twitch Plays Pokémon, which make it possible for viewers of a stream to control or affect the game by leaving certain types of comments.
Interactive streaming today is gaining a lot of attention from companies behind new games. Twitch has started to characterize itself now as a social network rather than just video gaming.
James McQuivey, a technology analyst with Forrester Research informs that comments are integrated into the site’s videos, letting viewers talk with each other, or even the players themselves, as they watch.
“It’s no longer just wanting to see how someone defeated the boss on Level 5,” he said. “It’s having that social experience and the comradeship of fellow gamers. Twitch has nailed that and if you’re Google, you realize that people watching stale old videos … that’s going to dry up.”
Johnathan “Fatal1ty” Wendel, a professional player of first-person shooter games: “For gamers, Twitch is like our ESPN. It’s also a social hangout, a place where we connect with millions of other gamers who share our passion.”
Second attempt to gaming
If the deal sees the light of the day like Twitter and SoundCloud, it will be Google and YouTube’s second attempt to invest in the gaming business. In 2012, Google led a $35 million investment in Machinima, a YouTube network that also specialized in videos about video games.
For a while, Machinima looked like one of YouTube’s most powerful properties but it tumbled and went through multiple layoff rounds and management changes. Earlier this year it ended up accepting a much more modest debt deal, led by Warner Bros.
Later its introduction of an API at last year’s Game Developers Conference, didn’t receive much traction in the community — it only opened live streaming capability to all in December. Twitch can be Google’s second attempt and it might be a success this time.
The deal which is yet to be confirmed is also said that Twitch had multiple buyout offers including Microsoft. Capital hasn’t been a problem with Twitch which is likely to turn profit this year but what it needs is a partner that can help it handle massive amounts of live and user-generated video on a global scale. Google seems to be the ideal answer for Twitch.
However there are genuine concerns on how would the YouTube deal affect current contracts with those who make a living streaming games? Even if those agreements stay in place, there could be ramifications in terms of what content can actually be streamed.
To get an answer for the concerns we will have to wait for an official statement on the development either from Google or Twitch, which could be the most significant development in the history of YouTube.