Weekly Update

Amazon’s live shot

It’s hard to tell from a distance whether Amazon actually bum-rushed Google to snatch away Twitch or simply scooped up the pieces after Google’s widely reported bid fell through (one plausible-sounding scenario, advanced by Ryan Mac of Forbes, is that Google was concerned about potential anti-trust problems and the parties could not agree on a break-up fee in the event of a DOJ kibosh). But in either case, Amazon’s $970 million acquisition of Twitch.tv significantly ups the table stakes in the emerging over-the-top live video game.

In Twitch, Amazon is buying a highly engaged global audience of over 55 million unique visitors per month. While tiny compared to YouTube, Twitch’s 7 million unique daily visitors spend an average of more than an hour on the site per day on the site, compared to less than four minutes on YouTube.

Twitch is also dedicated to gaming videos, one of the fastest growing categories of video on the internet. According to IHS, people around the world watched 2.4 billion hours of game-related videos last year, a figure it projects will grow to 6.5 billion hours by 2018. The core young male gamer demographic that tunes into Twitch is also among the most elusive on traditional platforms and is highly sought after by advertisers. According to analytics firm OpenSlate, nearly one quarter of the ad-supported content on YouTube is game related, and YouTube’s most popular channel, PewDiePie, with over 30 million subscribers, consists entirely of a Swedish guy playing and commenting on video games.

As I and others have discussed, the Twitch acquisition would clearly seem related to Amazon’s growing advertising ambitions. While Twitch’s ad revenue is believed to be small currently, probably no more than $50 million (the company has not disclosed revenue figures), and largely limited to game-related ads, its advertising efforts are relatively new and its staffing limited. Given the resources Amazon could bring to bear, both are likely to expand quickly.

Yet I suspect another key element of Twitch’s appeal to Amazon is that nearly all of the content consumed on the site is live and viewed in real time, an increasingly rare phenomenon on any video platform outside of live sports. Twitch’s peak daily audience of 715,000 concurrent viewers is larger than the average prime-time audiences of many cable networks, including CNN, MSNBC and E!.

As I noted in June, when the rumors of Google’s interest in Twitch first surfaced, the live aspect of Twitch’s programming and audience was likely a major element of its appeal to Google as well. Google has made several moves in recent months, such as its acquisition of ad-tech firm mDialog, which specializes in ad insertion into live streams, that point to strategy to make live content a bigger part of YouTube’s portfolio as it tries to lure more brand marketing dollars away from traditional TV channels.

Though YouTube has long -supported live streaming, live content tends to get lost there amid the vast sea of on-demand videos. Getting its hands on Twitch would have provided an immediate and major jolt to YouTube’s live-streaming efforts.

Apple, too, has quietly been expanding the amount of linear content available on Apple TV. As I wrote here earlier this month, Apple has lately made a series of moves that together suggest a broader strategy to evolve Apple TV into a kind of universal TV Everywhere platform that could be integrated with existing pay-TV service to make linear TV service –including live programming — available across Apple’s set-top and mobile ecosystems.

While live original programming such as Twitch has not been a major focus of Apple’s efforts so far, once its real-time streaming (and advertising) platform were in place it could easily begin to play host to new, original live channels, just as the App Store plays host to third-party applications.

The growing interest in live programming among ad-supported online video platform providers mirrors its growing importance to the traditional TV economy. As more programming is time-shifted, or accessed on-demand, the value of the audience that programming attracts to advertisers is eroding. Video advertising, across all platforms, is beginning to show symptoms of the same race to the bottom that gutted diplay CPMs.

In such an environment, live programming is more valuable than ever because ads can’t be skipped and live audiences are more engaged. That phenomenon is driving up the cost of rights to live sports, for instance, and it was likely a factor in Twitch’s $1 billion valuation.

It is also likely to be the next major battlefield in the OTT video wars.