The value of Twitch

About a month ago, word spread that Google-owned YouTube had completed negotiations to buy game-streaming service Twitch with an all-cash offer of $1 billion.

Yesterday, YouTube had the rug pulled from under them when Twitch announced that they had accepted another all-cash bid for $970 million from Amazon. Here’s the thank you post from Twitch CEO Emmett Shear.

So what exactly is Twitch and where is its value?

The best way to get a sense of Twitch is to try it. Start at the Twitch directory. Search for your favorite game. In my case, that’d be one of the Zelda games, perhaps A Link to the Past. Twitch makes it easy to find a wide variety of videos and live play of pretty much every game with any sort of following, even some pretty obscure titles.

So why would someone care about this? The key is the allure of Let’s Play, the general term for watching someone else play your favorite game. You might be watching to learn from the masters, or you might just enjoy the social interaction. No matter the reason, there’s no question that Let’s Play is huge. The most subscribed channel on YouTube (27 million subscribers) is a Let’s Play channel.

Twitch is sort of a specialized version of YouTube, with the entire focus on Let’s Play. Rather than the passive experience of a YouTube video, Twitch streaming can be live, and it can be interactive. One excellent example is TPP or Twitch Plays Pokemon, a massively successful Twitch social experiment, consisting of a slightly moderated, crowdsourced playing of various Pokemon games. TPP is something you just can’t do on YouTube.

Twitch also streams big gaming tournaments, and provides live channels with gamers, cosplay designers, and other personalities. At its peak, Twitch is said to equal the viewership of cable channels like Comedy Central, MTV, and MSNBC. All in all, a big loss for Google and a huge gain for Amazon. This is a cash cow and has the potential to be a direction changing acquisition for Amazon. [Hat tip to Daniel Mark]