Quirky online retailer Amazon.com announced this week that it will purchase the Twitch streaming gaming network for over $1 billion in cash and employee retention fees. Twitch is available on Microsoft's Xbox One, rival gaming platforms, and the PC, and it provides live and recorded game session viewing.
And no, I have no idea why Amazon would want such a thing.
"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," Amazon founder and CEO Jeff Bezos is credited with saying in a prepared statement. "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 had been rumored to be purchasing Twitch for a similar sum for several months now. While it's not clear why Amazon would even want this service, pushing Google aside (and thus diminishing that firm's online video dominance) may have been the primary goal. Because, when you think about it, how the heck is a video game streaming service worth over $1 billion?
Popularity helps, of course. With over 55 million users, Twitch is now one of the 15 most trafficked web sites worldwide, according to the analysts at Sandvine. In prime time, Twitch's viewership is similar to that of the cable TV channels MTV and Comedy Central, and it's not far behind MSNBC or CNN. Also, there are over one million gamers broadcasting their game sessions via the service now, and some actually make salary-level revenues thanks to advertising.
Amazon makes a fairly weak claim that it is "heavily invested" in games already, so the Twitch acquisition makes sense. The firm does of course sell video games along with every other kind of retail item imaginable, and it even offers digital game downloads via its web-based store. Amazon also sells electronic games for its Android-based Kindle Fire tablets. "We have a healthy business selling games to customers," an Amazon vice president told the New York Times.
Perhaps. But is that business enough to justify $970 million in cash and several hundred million dollars in retention agreements? This Twitch deal is the single largest acquisition in Amazon's history. What the heck did it just buy?