Online video behemoth YouTube, owned by Google, is said to have reached a deal to buy Twitch, a company that streams video of people playing videogames, for more than US$1bn. But why?
According to a report by Variety, in which it quotes unnamed sources close to the deal, the purchase will be an “all-cash offer” and will be announced soon. If it happens, it will be the most significant acquisition in YouTube’s history. YouTube itself was acquired by Google for $1,6bn in 2006.
Twitch is a popular videogame streaming service that allows gamers to broadcast and watch streaming gameplay footage in real time.
The company was launched in June 2011, and was developed by Justin.tv co-founders, Justin Kan and Emmett Shear. Justin.tv was one of the Internet’s first live-streaming, user-generated video websites.
Twitch has more than 45m monthly users and has a million members who actively upload videos every month.
The company serves more traffic than Facebook during peak times and is ranked fourth in US Internet traffic statistics — only Netflix, Google and Apple are bigger.
Since its inception, the three-year-old start-up has secured funding of just over $40m. In 2012 and 2013, it has secured investments of $15m and $20m respectively.
“The appeal of Twitch for gamers is in e-sports, watching really high-level gameplay from professional gamers around the world. Not only do these professional gamers entertain their subscribers but viewers use the live game feeds to pick up strategies and tactics for their own games,” says Geoff Burrows, editor at NAG, a South African magazine that writes about and reviews videogames. “Most South African gamers don’t have the ideal broadband infrastructure that allows local gamers to stream their game live and play it at the same time. Once this improves, we will see more live feeds from local gamers.”
Twitch sells monthly ad-free subscriptions for $9/month, but users can subscribe to individual channels for just $5/month. The company also has a number of deals in place to distribute shows from popular gaming websites such as GameSpot, Joystiq and Destructoid.
One of Twitch’s video feeds recently went viral and garnered more than a million participants.
For YouTube, this deal could mean that it will secure a larger chunk of the online-video streaming market and increase its user numbers. Twitch will benefit from Google’s massive data centre infrastructure.
Should the deal go through, it’s likely the US department of justice will take a closer look at the potential anticompetitive nature of the deal in the online video market, analysts says. — © 2014 NewsCentral Media