”If it thinks it can compete as another gaming ‘network’ it will fail. This is not ABC vs. NBC vs. FOX,“ CEO of Subnation Seven Volpone tells TheWrap
Backed with $146 million — $100 million of which is from Fox — and armed with a production studio in Burbank, social broadcasting platform Caffeine is betting that it can possibly dethrone the godfather of social gaming, Twitch.
Twitch, the live-streaming platform purchased by Amazon in 2014 for $940 million, allows users to watch and stream gaming- and non gaming-related content. It also allows creators to monetize their streams and has been responsible for kick-starting the careers of a number of young gamers.
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Like its rival, Caffeine offers users a place to watch gaming content and monetize live streams while also offering a mix of non-gaming content. However, the consensus in the gaming industry is that the Fox-backed startup will need to do more than mimic Twitch’s offer if it wants to successfully compete, not only with Twitch but with Facebook and YouTube, which also have built their own gaming destinations.
“If it thinks it can compete as another gaming ‘network’ it will fail,” CEO of Subnation Seven Volpone told TheWrap. “This is not ABC vs. NBC vs. FOX. They need to have a unique proposition around the development and production of cultural content. Expanding the purview and definition of a gamer.”
Carving out a place for itself among the live-streaming community is going to take some innovative gymnastics, but it is doable says Parks Associates research analyst Billy Nayden, who suggested four things the company can do to not be swallowed whole by Twitch.
1. Lower latency streaming technology
The foundation of Caffeine’s success will be built on its streaming technology.
“They can compete in really three ways, but the first one is technology,” Nayden said. “If they’re able to provide higher quality or lower latency streams than Twitch or YouTube, they can really carve out a niche.”
Though still in beta, Caffeine is off to a strong start when it comes to streaming tech. The company has built its own real-time distribution video network that leverages WebRTC, which is the same technology that powers peer-to-peer communication programs like Google hangouts. This means that everything on Caffeine takes place in real-time with no delays. This is especially essential in the social gaming space where a streamer regularly communicates with viewers via live chat in order to build rapport.
If Caffeine was not able to provide a reliable, low latency stream (little or no lag), streamers or viewers would likely go elsewhere. This is because, as with traditional sports coverage, streaming quality is a significant factor to user experience. A bad quality stream can make viewing gameplay unbearable, often pixelating coverage into an indistinguishable mix of colors.
A poor quality stream was one of the larger complaints from gaming fans when Facebook scored exclusive rights to stream coverage of events by ESL, the eSports organizer and production company that produces video game competitions worldwide. Users complained about the visual quality of the stream, while others ran into issues trying to watch the event on mobile devices. As a result, top Twitch streamers began hosting unauthorized streams on Twitch, which led to them being banned by ESL, ultimately resulting in an ESL boycott among fans and streamers.
2. Strong recommendation, search engine
The recommendation engine and news feed layout is another important piece to the puzzle. Like all content platforms, connecting users with programming that resonates is essential to increasing time spent on the platform, as well as increasing the number of returning users.
“If users think [Caffeine’s] feed is either easier to use or recommending better content or providing an experience that they enjoy more than the Twitch or the YouTube experience, which I think can be somewhat disjointed at times, they can differentiate themselves,” Nayden said.
Stepping out of the gaming sphere and looking at the AVOD platform Tubi, for example, the company was able to increase the time users spend on the platform by 20% within three months of launching its recommendation engine.
Currently, Caffeine’s search and recommendation engine is limited. Unlike Twitch, the platform does not have a categories tab, making it hard to find specific content. The two categories it does separate content into is “Live Now” and “Upcoming” tab, which is fairly limited. The app also doesn’t let users search by categories, only by username, which has posed a problem for some new users.
“I signed up and took a look around and never ended up using it. Not really sure how I would, to be honest. Doesn’t look like there’s a way to search for different categories. Not sure how I’d go about finding something I’d be interested in watching,” said a Reddit user who goes by the name of Matej. “Also, as a non-game streamer myself (I stream software development), being in a bit of a niche area, no one would be able to search for programming streams or be able to find them unless they just happened to scroll past and see me.”
3. Exclusive content and celebrity partnerships
“Another point of differentiation would be content creators,” Nayden said. “Obviously the biggest celebrity in the eSports world right now is Ninja, but there are all kinds of celebrities who have pretty significant followings, and I think if Caffeine were to entice one of these celebrities or a group of them to come exclusively to the platform, either by a better rev share or upfront money, that could drive users who are interested in particular celebrities to start using their service.”
Echoing that sentiment is an American gamer, who didn’t disclose his formal name, but goes by the alias KevFactor on YouTube.
“I have a hard time seeing Caffeine take off unless they could snag some high-profile people,” he told TheWrap. “As a small-time variety streamer, I think there is room for a platform that focuses on non-eSports stuff, at least in a niche way. For example, Mixer [Microsoft’s gaming platform] did something cool recently by having WWE superstars play the new Gears of War 5 [on the platform].”
While Caffeine has not announced any celebrity partnerships, it has been utilizing its relationship with Fox to provide users with content beyond eSports. Since its launch, the company has been streaming coverage of select sporting events from Fox, which, in the long run, can work in its favor, Nayden said.
“What we see in our research is that eSports viewers are more likely to watch traditional sports than your average broadband household,” he told TheWrap. “There is pretty significant crossover there, and it’s not limited to one particular sport or one genre or big event.”
4. Think outside the box
When any business is coming into a market with several established players and established consumer behavior, it is tough to compete by providing the exact same offering. It is for this reason that Netflix, Amazon, and Hulu don’t stream the same content and why there is only one Facebook, one Twitter, and one Instagram.
“You really have to go above and beyond what your current competitors are doing,” Nayden said, noting that the goal is to change the way consumers think so that when they want to watch eSports, their first thought isn’t Twitch, it’s Caffeine.
According to Nayden, one big way for Caffeine to separate itself and attract a bigger audience is by adding betting features, something that Fox has been experimenting with in its upcoming Fox Bet app.
“Gambling on eSports is really popular in Asia, and Fox has invested pretty heavily in gambling content and gambling infrastructure,” he said. “As it becomes legal in the United States to take gambling and sports online, I think that’s a significant advantage they have just because they already have the existing tech to implement something like that where as Twitch and YouTube don’t.”