Microsoft’s Xbox loses Twitch to Google’s YouTube (and why that matters)

TwitchTV-285x285Google has reportedly beat out Microsoft and others to reach a deal to buy Twitch, a popular videogame streaming company.

The acquisition, which is expected to cost $1 billion, according to Variety, will give YouTube a war chest of content that appeals to the hardcore gamer.

Over the past three years, San Francisco-based Twitch has become the ESPN of the video game industry, where viewers go to watch live footage of videogames being played.

Twitch, which started off as Justin.TV, would have been particularly strategic to Microsoft, but a report by Verge suggests that Twitch considered a deal with Microsoft unfavorable because it would no doubt tie its content to the Xbox platform. Twitch is embedded in both the Xbox One and Sony’s PlayStation 4 console.

Obviously, the acquisition talks between Google and Twitch could still breakdown, but from this vantage point, it looks like Microsoft is losing another significant acquisition that could have similar ramifications to Google’s original purchase of YouTube. Just as Microsoft has had to painfully concede the video streaming race to Google, and embed the YouTube app in every platform it makes from Xbox to Windows Phone, it too will have to partner with Google for videogame content.

Twitch is the leader in the space, with 45 million monthly users and more than 1 million members who upload videos each month, and Google has been aggressive in building out its gaming channels. To make matters even more skewed in Google’s favor, the search giant has also invested in Machinima, one of the largest gaming video companies on YouTube.

And, while video games may sound like small piece of the video-streaming market, it isn’t: Twitch represents 1.35 percent of all downstream bandwidth in North America.

For now, Twitch’s videos run on its own platform, rather than on a third-party site, like YouTube, and monetizes by advertising to its very lucrative demographic. Users can pay a premium to get a commercial-free version, called Twitch Turbo, for $9 a month.

  • http://www.techmansworld.com/ Michael Hazell

    I guess YouTube and Google will continue to grow and grow if this twitch deal goes through the DoJ. Google is already becoming a monopoly in a sense.

    • coip

      The DoJ needs to stop this sale. They never should’ve let Google buy Waze either. Google needs to be restrained. They’re evil and out of control.

  • rlon47

    Wow, I’d say we are getting way out there on speculation limb: an unsourced report from The Verge says Twitch viewed a deal with Microsoft unfavorably because it would undoubtedly want to tie Twitch to the Xbox platform. Given that the reason you’d want Twitch in the first place is to make money from ads and Twitch is already on the PS platform and the new CEO is all about putting Microsoft services on lots of platforms, I think it is even more likely (and just as well sourced) that Twitch wants more money than Microsoft is willing to pay.

    • http://www.techmansworld.com/ Michael Hazell

      In that case, then Twitch is just as slimy as Microsoft for wanting too much money. I seriously doubt Twitch is worth a billion dollars. It’s just an inflated arms race between tech giants to see who can swallow up the most companies and at what cost.

  • Dusty

    $9 a month to watch other people play video games?