In global gaming, Amazon gains an advantage, and Google loses a round

Amazon’s $970 million purchase of game-livestreaming startup Twitch today has paved the way for a new player to emerge in the global gaming landscape. Until this acquisition, Amazon had not fully demonstrated its interest and financial commitment to gaming. Now the online retailer and media company is all in, and Google, its primary competitor in the acquisition of Twitch, is out.

That deal surprised me because I had previously reported that Google had signed a deal to acquire Twitch, based on unnamed sources. Twitch is the latest property that was up for grabs for giant companies that want to dominate the global gaming market. In this war, the rivals are traditional game companies like Microsoft, Sony, and Nintendo and new upstarts are Google, Apple, and Amazon. This global competition is the theme of our GamesBeat 2014 event on Sept. 15 and Sept. 16.

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Until today, Amazon hadn’t really showed its intention to be more than an accidental game platform owner. The company has said it wants to be a player in games, and now it has put its money down to prove it.

Was my prior reporting about Google picking up Twitch wrong? Or did Amazon come in and steal the deal away from Google? A lot of people are asking me that. Let me just say that Google lost out on a deal that it should have won. It had the inside track on acquisition talks with Twitch, as Variety reported in May. Why did it hesitate? Variety reported that U.S. regulators were preparing to challenge the deal on antitrust grounds, since Google’s YouTube division dominates the market for Internet video, with more than a billion worldwide viewers and publishers and 6 billion hours of video a month.

Twitch would have been a small addition to that with more than 55 million monthly active viewers and streamers, but it would have added to the concentration of the market, increasing YouTube’s market share for Internet video, even if Twitch was the dominant player in a new form of video: livestreaming of gameplay. I’m unsure how regulators would have ruled on the merger, but it would have been a risk. Amazon, however, didn’t have this problem, and it charged ahead to take the deal.

Gamers, of course, could benefit from competition between Amazon and Google in game video. Twitch could become a cool feature of Amazon’s Fire lineup of set-top box, smartphone, and tablets.

Amazon wants to challenge Google on a variety of fronts, including video for gamers, and the livestream operations of Twitch are built for delivering high-quality video to as many people as possible for watching games and e-sports (competitive video gaming) events. As e-sports took off, Twitch became the way to publicize them around the globe. While e-sports and game spectating had been around for years, especially in other countries, Twitch was really the first entity to executing on what was becoming a worldwide business, said Stewart Alsop, a partner at the venture capital firm Alsop Louie. That group was an early investor in Twitch.

“Twitch is going to introduce Amazon to a new category of operations,” Alsop said in an interview with GamesBeat. “I think Amazon of all of the people we worked with appreciated it the fastest. They are world-class in multiple sectors. Twitch is going to introduce Amazon to the next level up in making a connection live between two points in real time.”

Twitch chief executive Emmett Shear said in a statement that Amazon will support Twitch with resources and pretty much leave it alone.

“We chose Amazon because they believe in our community, they share our values and long-term vision, and they want to help us get there faster,” Shear said. “We’re keeping most everything the same: our office, our employees, our brand, and most importantly our independence. But with Amazon’s support we’ll have the resources to bring you an even better Twitch.”

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“Amazon is highly invested in games,” said Mike Frazzini, the vice president of Amazon Games, in a statement. “We have a significant business selling video games, most game developers use Amazon Web Services to build their game infrastructure, and we’ve continued to invest in improving the customer experience for gamers and game developers — developing original new games via Amazon Game Studios and releasing capabilities like Amazon Appstream and Amazon Cognito to remove even more heavy lifting from game development.”

“Twitch is another substantial step in this direction for Amazon,” Frazzini added. “Twitch has fundamentally changed how games are consumed and interacted with, and it’s a service that gamers and game broadcasters now find hard to live without. Playing video games started with single player gaming, then came multiplayer, now there’s Twitch. It’s quite remarkable what Twitch has accomplished in such a short time, and we all believe this is just the beginning of what they will become over the long term.”

If you look at the assets Amazon owns, it now has the capacity to make games, sell games, market them, distribute them, and publicize them. In an age when finding games is a huge problem in an app store with a couple of million apps, this capability will be attractive to game makers. Google has many of those capabilities as well, but Twitch is a huge loss when you start adding up the scales in the competition between the companies.

 

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