Watching others play video games the next big thing
Video games have been a spectator sport since teenagers crowded around arcade machines to watch friends play "Pac-Man." And for decades, kids have gathered in living rooms to marvel at how others master games like "Street Fighter II" and "Super Mario Bros."
But today there's Twitch. It's the online network that attracts millions of visitors. Most watch live and recorded footage of other people playing video games, in much the same way that football fans tune in to ESPN.
Twitch's 55 million monthly users viewed over 15 billion minutes of content on the service in July. That made Twitch.tv one of the world's biggest sources of Internet traffic. According to network services company Sandvine, Twitch generates more traffic in the U.S. than HBO Go. That's the streaming service that's home to popular shows such as "Game of Thrones" and "Girls."
Fans watch for the same reasons ancient Romans flocked to the Colosseum. They want to witness extraordinary displays of agility and skill.
Jacob Malinowski, a 16-year-old Twitch fan who lives outside of Milwaukee, admits that some may question the entertainment value of Twitch's content.
"(But) I think it's interesting because you get to watch someone who's probably better at the game than you are," he says. "You can see what they do and copy what they do and get better."
Amazon's commitment to purchase Twitch for nearly $1 billion this week is an acknowledgement that the service's loyal fan base and revenue streams from ads and channel subscriptions present enormous opportunity.
Most Twitch viewers are gamers themselves. They not only see the live and recorded video sessions as a way to sharpen their abilities, but also as a way to interact with star players in chatrooms or simply be entertained.
Sorah Devlin, a 31-year-old mother of two from Geneva, New York, says she watches Twitch with her 7-year-old son and 4-year-old daughter. Their game of choice is "Minecraft," which lets players build or break things out of cubes and explore a blocky 3-D world around them. Devlin and her kids watch popular "Minecraft" players who go by names such as iBallisticSquid and SuperChache show their skills. She said she is comfortable watching them with the kids.
Twitch fans are mostly male and between the ages of 18 and 49. That's an important demographic for advertisers. Nearly half of visitors spend 20 or more hours a week watching Twitch video, according to the company.
"You've got a hyper-growth platform with a niche audience," says Nathaniel Perez, global head of social media at advertising firm SapientNitro. "It's basically the best you can get, from an advertisers' perspective."
As a result, Twitch commands premium prices from advertisers. The company's cost per thousand views, or the amount an advertiser pays to run one video ad 1,000 times, is $16.84 in the U.S. That's well above the average $9.11 per thousand advertisers typically pay for video ads placed on other sites.
Twitch can be lucrative for talented gamers, too. The site allows some gamers who set up channels what the company calls "broadcasters" to charge $5 monthly subscription fees to viewers. Plus Twitch gives a portion of all ad revenue to broadcasters.
Twitch didn't start out as a video game-focused company. The company, based in San Francisco, spun out of Justin.tv. It was a quirky service that revolved around a video feed tracking the daily activities of co-founder Justin Kan. The focus shifted to live video for gamers in 2011.
Brett Butz, 26, who works as a compliance officer outside of Boston, says he's spent $20 to $25 to watch content on Twitch. It's "more than I ever paid for YouTube," which also broadcasts games. While YouTube is popular with gamers, Butz says he prefers Twitch as a place to view games.
Amazon is promising to let its newest acquisition operate independently. But for some gamers, the deal brands Twitch with a corporate stamp.
"I'm curious to see if, in a year, it'll still have cache," says Patrick Markey, psychology professor at Villanova University who focuses on video games. "It's definitely considered a gamer platform but now that Amazon is buying it, is it becoming mainstream ... is it going to lose its coolness?"
Critical thinking challenge: Why does Amazon want to buy Twitch? What would Amazon do with it? How could Amazon make more money with Twitch?