It’s not just the games…
Amazon’s announcement that it is buying Twitch provoked considerable debate in my house. My husband cannot for the life of him understand why anyone would choose to watch another person play a video game. Especially when they could watch star-level football, instead. “Are we not drawn to excellence?”, he asked. “Surely people would rather watch Messi?”
I am not a gamer, at all, I find video games stressful and at the same time a bit tedious, if that makes any sense. But, I confess, I do have Twitch on my iPad, and I have spent a bit of time mesmerized by trampling hordes of elephants in Age of Empires (the only PC game I ever, you know, played, back in the day…). It’s banal, pointless and perplexing for the non-gaming generation. And yet I get why Amazon forked out almost $1 billion in cash for its future revenues and market.
First, the traffic:
Twitch dominates live video stream traffic (people watching live video on a PC, tablet or phone) with a 44% market share. It has almost 50 million users a month, who spend an average of 2 hours a day (!!!) on the site. For comparison, Amazon is at almost 80 million users (and I doubt they spend two hours a day there), and Netflix only 7 million. According to the Wall Street Journal, it has almost 2% of US peak Internet traffic, making it the web’s 4th biggest magnet, ahead of Facebook, Amazon, Pandora…
One of Twitch’s most popular games, League of Legends, has between 100,000 and 250,000 people watching at any given time, mainly from the very “valuable” young male demographic. To put those figures in perspective, this is more than the cable channel CNBC. Approximately 32 million people watched the League of Legends’ world championships on Twitch last year, more than watched the 2012 Olympics’ opening ceremony.
Second, the revenues:
Twitch’s business model is similar to YouTubes’: advertising revenue. And with over 310 million visits a month, that can reach dizzying levels. Twitch also follows YouTube’s lead in partnering with gamers, allowing them to cultivate a following on Twitch, in exchange for a percentage of the ad revenue from their videos. As with YouTube, the Twitch partners can pre-roll ads (users see an ad when they connect with a feed), but a big difference is that they can also launch ads at any time during the stream, so all viewers currently watching that game see that commercial.
So how much can a player make on Twitch? Again, figures are not disclosed, but more and more do well enough to make it a profitable full-time job, earning over $100,000 a year.
Making a living by playing video games is not that new. More than half of YouTubes’ top earners are gamers, and hundreds of thousands sit through ads to watch the game unfold. The difference is that Twitch elevates the playing to almost athlete status. The play is live, and therefore more “real” and exciting, and players can develop a loyal fan base that check in regularly. During the live play, they can chat with others watching at the same time. Excitement and community, with fantasy and a story line thrown in.
Third, Twitch represents, for now, anyway, a fundamental shift in how we get our entertainment, and in how we connect with each other. Unlike football or other spectator sports, video games on Twitch are always on. There is always something to see, and such a wide range of games to choose from. The younger generation is accustomed to choosing when and where it watch its entertainment, which is why YouTube has overtaken TV as the medium of choice, in spite of the ubiquitous option of taping and replaying favourite shows at its convenience. Twitch is on your smartphone, your tablet, your PC, so you can log in anywhere, anytime for your vicarious shot of adrenalin.
And the social aspect is powerful. The camaraderie of watching football with your mates is substituted by a live chat stream, full of absolutely nothing at all, other than people connecting, acknowledging each other, letting others know they exist. Empty, perhaps, but bar-game chatter has never exactly been full of substance, has it? Twitch’s live chat stream is the same thing, just more open, global and anonymous. Much like the web itself.
The pull of sport and competition is as old as civilisation itself, and in recent times has become seriously big business. Video games, since the first one was developed, depend on the same instincts: the thrill of besting yourself and/or your opponent (another player, or the program), and the endorphin rush that focussed, intense activity produces. Gaming has been around but a blip in time compared to spectator sport, but is already gearing up to be an important player in the money stakes, generating over $100 billion in annual revenue.
So it’s easy to see why companies like Amazon want a piece of the gaming business. Amazon already sells a huge amount of games a year, and recently bought a game developer. Rumours were floating around last year that Amazon was working on its own game console, to compete with Xbox and PS3. So, seen in that light, the purchase of Twitch makes sense.
But I don’t think that that was the main reason they wanted it. Twitch does not make money from games. It makes money from advertising, just as YouTube, Google, Facebook and just about any social network you can name does. Twitch is not a gaming company. It is an entertainment platform, in the same sense that YouTube is, with the added immediacy of being live, and the usability advantage of being focussed.
I am surprised that Amazon is the protagonist here, it makes more sense for Facebook or Google, with their heavy weight in our social world. Whether Amazon want it for an advertising platform or to open up a social world, remains to be seen. I expect the answer will end up being: both.
It comes with significant risk: online gamers tend to be very engaged. Amazon’s exalted status as the shining example of e-commerce, recently tarnished by a series of mis-steps and legal battles, could be seriously damaged by an all-out attack from an enraged gaming community.
Currently playing on Twitch is the League of Legends final, it is quite something to see. A fantasy-based video game, quite vicious and action-packed, with professional sports-style edge-of-your-seat commentary. I confess that I understood absolutely nothing. Nothing. I couldn’t even make out the players. But the action was intense, the commentary gripping, and I was entertained. (Not sure about their ad targeting, though. An admittedly attractive Hugh Lawrie was pitching me skin cream for men over 40.)
So, the purchase of Twitch makes sense, for its huge potential, not only economic. Just as Amazon changed the way we think about buying, Twitch will change the way we think about gaming. Twitch will transition video gaming from something you do on your own in your room, to a social activity. Not on the same level as actually going out and talking to your friends, but it’s a step towards incorporating a solitary activity that’s not going away into the new, connected society that’s developing under our very noses.
(Update 1/9/14: I’ve just come across this very interesting article in the NYT, about e-sports as a growing sector. It has a good “introduction to Twitch” video.)