[Editors Note: I started working on this essay back in May when it look like YouTube was going to acquire Twitch. But now, 4 months late Amazon is going to buy twitch. ]
In May, it looked like YouTube was going to drop $1 billion to acquire Twitch. At that point it seems like a no-brainer. From The Verge:
Everything from recreational play to professional eSports tournaments are now being broadcast live over the internet, with last year's League of Legends season three final attracting 32 million viewers, 8.5 million of whom were watching simultaneously. That's the equivalent of the entire population of New York City glued to a stream of mythical team-based warfare.
To put it another way, Game 6 of the 2013 World Series between the Boston Red Sox and the St. Louis Cardinals was watched by an average of 18 million viewers. Live eSports is big business. Need another example? Joseph Garrett generates somewhere in the neighborhood of $88,000 to $880,000 of monthly ad revenue. How? He posts videos of himself and his friends playing MineCraft. If you have a 10 year old, you would know him as "Stampy". Stampy is developing a TV Show with Jack Black.
Now we know Amazon is acquiring Twitch for $970 million. Google paid a billion dollars for YouTube a decade ago. We know now that marked a paradigm shift in online entertainment. This deal is the next version. When Google bought YouTube, it was there was an inkling that streaming video was going to be big. But at the time YouTube was filled with a bunch of low quality crap and pirated Tundercat cartoons. Twitch's user statics from last month are insane. Re/Code reported Twitch drew 50 million unquie visitors, up from 45 million in January. Users streamed 155 billion minutes of content produced by more than 1 million broadcasters. 58 percent of their users viewed more then 20 hours on content per week. Any television network would kill for those numbers.
When the acquisition was announced one of my co-works scoffed the idea of watching eSports and gaming videos. He is a huge sports fan. I asked. "How is watching a Dota2 tournament different then watching a Cardinals game?" His response was fast, "I can play Dota2 anytime I want. I cannot play baseball." Which is precisely the point. You can play Dota2 any time. Or World of WarCraft or Call of Duty. We watch college and pro sports as part, in part, as wish fulfillment. We want to hit the go-ahead home run to win the World Series or get a buzzer-beater to make it to the NCAA finals. Most of us will never get those experiences.
But we can watch a video of someone beating Tubular (the hardest level Super Mario World Level). Then we can go beat it. I can learn a by watching well seasoned League of Legions teams compete fast paced match. As someone who has tried to into League of Legions, videos with live commentary are a more effective teaching tool then reading poorly written strategy guides. Or we can pull up a video of someone playing Minecraft in one window and play with our friends in a second.
As a casual fan, I watch around 85 hours of regular season NFL coverage. That does not include the time spent researching and running a fantasy football league. The line between these two pass times is as much generational as it is anything else. A 10 year old getting super into Cloud 9 is not really much different then getting super into the Denver Broncos?
The world of gaming videos and eSports gives the viewer a chance to play alone. It is the "Second Screen" experience major sports leagues have been trying to develop for 5 years. It is why fantasy sports has generates so much revenue for ESPN and Yahoo. It is a way to actively participate with a thing that we love.
Amazon Bets on the Next Paradigm
Amazon is betting that Twitch (and entertainment that originates on the internet in general) is going to be the future of entertainment. Amazon has already opened a video game studio and hired high profile game designers. In a resent Daily Stratechery (Paid Link), Ben Thompson argues it is likely Amazon will be going after Valve and Steam soon.
The Twitch acquisition is next ESPN. Amazon wants some of that sweet Disney money.