Amazon Purchases Twitch For $1.1 Billion (AMZN)

Amazon, the biggest online retailer of hard goods, has announced a deal to purchase Twitch for the price of $1.1 billion in cash and stock. The cash portion of the deal totals around $970 million. The Twitch acquisition is the second largest in Amazon’s history after its acquisition of Zappos for $1.2 billion in 2009. The announcement of the deal came as a shock to some as Google was visibly pursuing a purchase of the service.

Many people do not even know what Twitch is. Some would describe it as a networked set of communities organized around particular video games. On Twitch.tv, you can watch an audience watching individuals playing video games and commenting on the game play. In addition to discussing the games, members of the communities can also talk about themselves and their lives. Startlingly, Twitch’s peak viewership is nearly as high as the average prime-time viewership of cable channels such as MTV, CNN, and the E! Network.

Twitch hosts multiplayer games and large events with corresponding commentary using a technological framework that is ideally suited to the task. The live events broadcast on the Twitch platform attract huge audiences that follow gaming like sports fans follow their favorite teams. Twitch has become the fourth-largest user of Internet bandwidth country, acquiring 55 million unique users in July who viewed upwards of 155 billion minutes of gaming. The championship for League of Legends had nearly 32 million people watching on various streaming services like Twitch.

Twitch provides its own content and audience to Amazon’s growing media empire, which made it an attractive acquisition target. In recent years, a number of non-traditional media companies have been snapped up by larger players in the industry, including the purchase of AwesomenessTV, a popular YouTube channel, by DreamWorks Animation, a significant investment in Crunchyroll, a streaming service for anime, by former president of News Corporation Peter Chernin, and Disney’s purchase of YouTube video supplier Maker Studios.

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