Must-know: Amazon buys Twitch to take on Netflix and Google (Part 1 of 6)
Twitch is popular among video game enthusiasts
A few days back, Amazon (AMZN) agreed to acquire Twitch for $970 million. Twitch is a popular website for video game enthusiasts who want to broadcast their video games to other people or watch other people play video games in real time.
Twitch is less than three years old. The most impressive thing about it is that it’s now the fifth-largest video streaming website in the U.S.
According to a report from Qwilt and as the chart below shows, Netflix (NFLX) dominates Internet traffic in the U.S. among all websites, with a share of 57%. Google’s (GOOG)(GOOGL) YouTube, Amazon, and Hulu are some of the other players before Twitch in the list of top five players driving U.S. Internet traffic.
How Twitch would benefit Amazon
Although Twitch currently holds only a 1.5% share of U.S. Internet traffic, the main thing to note here is that it’s growing fast. According to network services company Sandvine, Twitch generates more traffic that HBO Go, which is an operating subsidiary of Time Warner (TWX). More importantly, Amazon can boost the popularity of its Prime membership program by giving ad-free access to Twitch users.
Amazon’s Prime membership program is a $99-per-year program that allows users to purchase goods with free shipping. The Prime program also offers its users free video streaming service for its video content.
Amazon has already made a lot of investments in acquiring original video content. As a result, it managed to increase its streaming video traffic by nearly 300% between March 2013 to March 2014, according to another report from Qwilt. This let Amazon surpass Hulu and Apple (AAPL) in terms of the volume of video streaming traffic consumed from the site to U.S. broadband subscribers.
But the company still needs to make lot of efforts to catch up with Netflix and Google. Acquiring Twitch would give Amazon an opportunity to come closer to these players and at the same time boost the popularity of its Prime program.
Browse this series on Market Realist: