The Twitch business model is based on premium features offered through subscriptions in a free live-streaming video platform. The company was founded in 2011 by five people: Justin Kan, Emmett Shear, Kyle Vogt, Kevin Lin, and Michael Seibel. It is headquartered in San Francisco, California, with servers worldwide to enable content creation for its viewers.
The platform allows content creators to share audiovisual content, even though it primarily focuses on the live-streaming of video games. Users can stream interesting subjects, such as art, sports, music, and even cooking. The platform also has chat channels, making it more engaging and interesting.
Steadily, Twitch grew, and two years later, in 2013, it had about 45 million viewers. Amazon became interested in the potential and business model of this rapidly growing business and, in 2013, acquired Twitch for $970 million.
Although Amazon bought Twitch, Twitch’s operations are not dependent on the parent company, although it has relations with Amazon products. Over the years, it has made a name for itself in the online video streaming market. It tops the industry, with over half of the overall market share. In 2020, it generated about $217 million.
Contents
Twitch was founded in 2011 by five people: Emmett Shear, Kyle Vogt, Michael Seibel, Justin Kan, and Kevin Lin, with its headquarters in San Francisco, California. The company began as Justin.tv in 2005 and grew speedily to become one of the major names in the live-streaming platform and eSports industries. In 2011, Twitch was forked as an off-shoot subsidiary company of Justin.tv., which was founded by Justin Kan but only focused on a live stream of the day-to-day life of Justin.
However, Twitch enjoys being the biggest live-streaming platform in the world, and its focus has shifted from just one thing to everything in real life, eSports and video games. Justin.tv started with just a few people, but eventually allowed others to join. Chat rooms on Justin.tv were referred to as accounts, and the base used by users for live streaming was known as broadcasts. At some point, the platform separated its contents into categories, but the niche which grew speedily was eSports.
In June 2011, a new platform specifically designed for gaming, Twitch TV, was launched. Twitch’s growth was exponential in its first year, with about 3 million monthly visitors. By 2012, it had over 20 million monthly visitors. In 2014, it had 55 million visitors. 1.8% of peak internet traffic was solely Twitch, surpassing Amazon, Facebook, and Valve. As a notable name in the content creation and video games world, Twitch attracted tech giants Google and Amazon with its growth, but Amazon won the bidding war. It successfully bought Twitch for $970 million in August 2014. By then, Twitch Interactive dominated the eSports and gaming world with little to no competition. It progressed to acquire an agency, GoodGame Agency, in late 2014 and Curse Inc., a network of gaming sites.
In 2016, Twitch Prime was introduced; it is a subscription service available to content creators and viewers who already have Amazon Prime subscriptions. Through this service, Twitch users get extra benefits like free in-game content, ad-free streaming, discounts on purchases made in games, etc. Eventually, the subscription service was renamed to Prime Gaming to align with the selection of services of Amazon Prime. Twitch has made deals with great streamers, such as Blizzard Entertainment, and became the official streaming partner of the Overwatch League in 2018. Two years later, in May 2020, Twitch launched its safety advisory council comprising academics, streamers, and policy institutes. Twitch continues to dominate the gaming and eSports market, with about a hundred million monthly users. Also, it has expanded to offer creative and interesting content, affiliate programs, music broadcasts, and for streamers.
In 2011, Twitch started as an off-shoot of Justin.tv before it was merged with its forerunner. The parent company that ran the two TVs, Justin and Twitch, rebranded to become Twitch Interactive. Amazon acquired Twitch after the merger.
Currently, Twitch Interactive is a subsidiary company under Amazon Inc. As such, the President and CEO of Amazon Inc., Jeff Bezos, is the current owner of Twitch.
Twitch’s mission is, “to help people do what they do more pleasingly.”
The video streaming platform allows users to live stream their desired content. Twitch focuses on streaming live video games, but content creators can also decide to explore more interesting subjects. Also, there are chat channels on the platform. Contents on Twitch can be viewed live or on-demand on the website, gaming consoles, mobile apps, and smart TVs.
Streamers can chat directly with their audience, which is an added advantage for the company. Users can subscribe to their favorite streamer channel to support and cheer them. Some other features on Twitch include:
Although some of its content and advanced features are premium, most content is accessed freely. Twitch runs a freemium business model, increasing its brand awareness and enticing and keeping users at a faster pace.
Even though Twitch is mostly free of charge, its estimated annual revenue is around $500 million. Over the years, the company has managed to carve out different revenue streams – users’ subscription fees, merchandise sales, offering Bits: Twitch’s digital currency, and running video advertisements. Asides from that, its parent company’s influence creates more sales opportunities.
Bits, also referred to as Cheer Bits, are the company’s internal digital currency used on the platform. Viewers use them to cheer and support their favorite streamers. Bits can be purchased on the platform, with price packages varying from $1.40 for 100 bits to 25,000 bits for $308. Streamers receive a part of every bit sent their way. They get about 60% to 80% of the revenue from Bits. The percentage of the streamer gets on some factors, such as geography, the number of bits received the popularity of the streamer, etc.
To support and cheer on their favorite streamers, Twitch users may subscribe to a channel to show their support for the content creator. The subscription model is divided into three; $4.99, $9.99, or $24.99 monthly. Besides the pleasure of supporting a streamer financially, the subscriptions come with some benefits, such as:
The company generates income through an agreement with the content creator, referred to as a revenue share agreement. A 50% share of every subscription goes to Twitch once sold via the platform. Popular streamers enjoy an increase in the percentage share. Some can enjoy 60% to 90% of their subscription revenue.
This is where the parent-company partnership is fully on display. It was launched in October 2017, and Twitch fans can buy Twitch-owned merchandise only on Amazon. But due to the fandom, the merchandise is sold at higher margins. Amazon itself handles everything from payment to shipping. Fortunately, purchasing the merchandise is less stressful for Twitch users subscribed to Amazon Prime. Asides clothes, users buy accessories for their dogs or gift cards.
An average Twitch user is about 21 years old, according to Statista. Naturally, this age group has a smaller income than older people, and most cannot pay for any premium features of Twitch. So, Twitch activated video ads on their content to compensate for the free package’s lack of revenue. Content creators get paid by Cost Per Mile (CPM). Depending on the CPM performance, a certain percentage of the ad goes to the streamer, while the rest goes to Twitch.
Every content creator has a designated contract that specifies their incentives and rates. Precisely, it comes with a confidentiality clause, making it hard to decode the amount a content creator makes from advertising. Streamers get to decide where they want the ads to play – before the video starts or in between the streaming. June, October, November, and December are the months when advertisers pay for ad space the most, making CPM prices seasonal.
The Twitch Business Model can be explained in the following business model canvas:
Twitch’s customer segments include:
Twitch’s value propositions are:
Twitch’s channels are:
Twitch’s customer relationships include the following:
Twitch’s revenue streams are:
Twitch’s key resources consist of:
Twitch’s key activities comprise:
Twitch’s key partners include the following:
Twitch’s cost structure is as follows:
Here’s a brief look at the SWOT analysis of Twitch:
Here are some of Twitch’s strengths:
Below are written some of Twitch’s weaknesses:
The following are some opportunities that Twitch can enjoy:
Some of the threats Twitch faces are:
Twitch continues to dominate the live-streaming market, providing excellent video live-streaming services on gaming, gaming streaming, and gamers. Over time, it expanded its services to accommodate live-streaming for artists and general audiences. After it became the 4th largest source of traffic on the internet, it was acquired by Amazon. Twitch makes money by offering subscription plans with attractive side benefits to attract users. It has millions of loyal content creators and viewers due to the pleasant experience it provides.
Tesla, Inc. is by far one of the most well-known companies in the world. As…
The Duolingo Business Model revolves around creating an interactive language-learning platform accessible to people worldwide.…
Johnson & Johnson, a pharmaceutical and consumer goods company established over a century ago, prides…
Caterpillar, a renowned global manufacturing company, has dominated the industry for decades. With its extensive…
Instacart, founded in 2012, has quickly become a leading online grocery delivery platform. It offers…
The Quora Business Model revolves around creating a platform where users can ask questions, share…
This website uses cookies.