Twitch, which was acquired by Amazon for about 100 billion yen, is still in financial difficulties
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Twitch, a live game streaming platform, is still struggling 10 years after it was acquired by Amazon in 2014 for about $970 million (about 100 billion yen at the time), according to a report by the Wall Street Journal.
Amazon Paid Almost $1 Billion for Twitch in 2014. It's Still Losing Money. - WSJ
https://www.wsj.com/tech/twitch-amazon-video-games-investment-9020db87
Twitch is best known as a live-streaming platform for video games, but despite its explosive popularity, it has consistently faced profitability issues.
Amazon has not disclosed Twitch's revenue, but financial documents obtained by the WSJ show that in 2023, Twitch generated about $667 million in advertising revenue and $1.3 billion in commerce revenue. This represents less than 0.5% of Amazon's total revenue. According to a person familiar with the matter who spoke to the WSJ, Twitch's advertising revenue has plateaued since the COVID-19 pandemic subsided.
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Twitch's challenges are wide-ranging, including the need to reduce distribution costs, the need to invest in content management tools, and the incompatibility of long-term live videos and advertising sales. In addition, spending by its highest-paying users is declining, and growth in new user acquisition and engagement is also slowing. WSJ predicts that if this trend continues, Twitch's revenue will decrease by nearly $250 million (about 38 billion yen) by the end of 2025.
In addition, the WSJ points out that industry-wide trends are working against Twitch, including a slowdown in gaming spending and the growing popularity of short videos on platforms like TikTok and Instagram. In addition, Twitch has spent more than $100 million on exclusive contracts with top talent and rights to broadcast e-sports events. It also invested in services that it later discontinued or deprioritized, such as karaoke services and watch parties.
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However, the WSJ has noted that Twitch has been successful in categories other than gameplay commentary, particularly 'Just Chatting,' and that the sports, travel, and music categories are also growing. Twitch also maintains its position as an influential platform, with celebrities and politicians using the platform. Analyst Mike Hickey commented, 'If you're not making a profit when demand is soaring, there's something wrong with your management structure.'
Amazon has taken a relatively hands-off approach to Twitch so far, but in 2021 it integrated Twitch's ad sales team into the company to improve performance. However, Amazon CEO Andy Jassy has shown a focus on profitability, and in January 2024 the company made major cuts to its workforce, laying off 35% of its employees , raising concerns about the possibility of further cuts.
In 2023, Emmett Shear, co-founder and CEO of Twitch, left the company and Dan Clancy, former head of engineering and consumer products at YouTube, was appointed as the new CEO. CEO Clancy has launched a new strategy, including improving the viewing experience from smartphones and introducing short video sessions.
According to the WSJ, CEO Clancy meets with Twitch creators around the world and broadcasts live, but employees have criticized his performance, spending a lot of money to travel around the world while many employees have been laid off due to financial difficulties. CEO Clancy explained in an email, 'If I were running a manufacturing company, I would meet with companies that supply raw materials and companies that sell products. For Twitch, streamers play a similar role,' the WSJ reported.
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