July 26, 2014

Google Reportedly Finalizes Deal To Acquire Streaming Game Service Twitch

redOrbit Staff & Wire Reports - Your Universe Online

Two months after rumors first circulated that Google was planning to purchase Twitch, the Mountain View, California-based tech giant has reportedly finalized a deal to acquire the streaming video game service for the sum of $1 billion.

According to USA Today’s Brett Molina, neither party would comment on the reports. However, Google’s YouTube video service has reportedly been eyeing Twitch, a service that allows video game players to upload and watch free, live footage that could be streamed from Microsoft Xbox and Sony PlayStation 4 consoles, since mid-May.

While the agreement has not been officially announced, VentureBeat said that sources familiar with the situation had confirmed it had been finalized, though they did not report the exact purchase price.

The website’s Dean Takahashi also said Twitch investors were said to be pleased with the return on their original investments, and noted the deal “underscores the value of live Internet streaming and the rise of competitive gaming as a spectator sport – something that draws millions of viewers, can offer prize pools that surpass pro golf’s marquee events, and provides a multibillion dollar opportunity for advertisers.”

Twitch, which was created by cofounders Justin Kan and Emmett Shear in 2011, has raised approximately $35 million in private funding, explained Variety NY Digital Editor Todd Spangler. The San Francisco-based streaming service currently has over 45 million monthly users watching an average of 106 minutes of video each day.

“Twitch generates revenue through ads and as well as subscriptions, with about 300,000 paying members,” Spangler said. “With Twitch, YouTube could extend live-streaming to other categories, including with multichannel network partners like Disney’s Maker Studios and Machinima, which focuses heavily on the male-oriented videogame segment. YouTube’s own efforts to intro live broadcasting have had limited success to date.”

“Google and YouTube also want Twitch because it has established a proven model for subscription-based video,” he added. “A year ago, YouTube launched a paid-channel initiative with 30 partners, including The Jim Henson Co., NatGeo Kids, Nelvana Enterprises and DHX Media. But to date, the pay channels have seen very little traction.”

In addition to streaming video game footage, Takahashi noted that Twitch distributed programming from industry news sites GameSpot, Joystiq, and Destructoid, all gaming-news sites. Viewers watch over 13 billion minutes of video each month. As for YouTube, while it is the top-ranked Internet video platform and is viewed by more than one billion people worldwide each month, the majority of those videos are uploaded by users.

If reports that the acquisition has been finalized are true, PC Mag’s Angela Moscaritolo said that it would be “the most significant acquisition in YouTube history,” since recent reports found that Twitch “generates more traffic in the U.S. than HBO GO.” In fact, back in March Twitch accounted for 1.35 percent of all downstream bandwidth on North American fixed access broadband networks, which is nearly a threefold increase from last fall.

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