YouTube is said to be on the cusp of acquiring gaming platform Twitch for $1 billion, a deal which arrives only 8 months following a $20M Series C round last Fall, bringing Twitch’s total investment to over $35M to date.
Founded in 2011 as an extension of Justin.tv to support the fast-growing esport category, Twitch has become a place for gamers to upload and watch gameplay videos for free online and via Xbox and PlayStation apps.
If the deal goes through — and supposedly it’s basically in the can — this would be a landmark acquisition for YouTube, which was acquired by Google for $1.65 billion in 2006, and would cement its footing as the dominant online video platform. For this reason, there is speculation, according to Variety, that this deal will get extra scrutiny from the Fed.
YouTube’s parent — Google — led an investment in Twitch distribution partner, Machinima, in 2012 for an undisclosed amount. Machinima also recently took investment for $18M from Warner Bros. and is a platform ripe for acquisition. While Twitch is not an MCN, Justin.tv’s live stream technology and community platform, coupled with big partnerships with CBS Interactive, Major League Gaming (the largest esports league) have enabled Twitch to quickly tiptoe onto Machinima’s turf as the go-to destination to reach gamers.
Twitch’s live streaming technology, YouTube-like Partners Program, subscription model and video-chat community would integrate well with YouTube, and offer a highly replicate-able revenue stream outside of the YouTube environment. There would also likely be some integration of Google+ into Twitch meaning about 45M+ monthly unique users who would probably have to opt-in to G+, which we know has been a big focus on YouTube.
The deal would also impact other UGC platforms with sizeable esport communities and live streaming technologies.
It’s also quite possible that Twitch’s rapid growth and strong community were pulling audience from YouTube, so what better way to hold onto that treasure-trove demographic than to buy it back?
And Twitch Stands to Gain:
Aside from being added to the Google family, an acquisition by YouTube could allow Twitch to strengthen its European presence and continue to scale globally. The streaming functionality of YouTube is also much more advanced than Twitch’s so users could get a better viewing experience.
If the deal moves forward, there could be quite a backlash for the existing Twitch community in terms of Copyright Infringement, since YouTube has been cracking down on music and game play assets being used without the appropriate permissions. Twitch currently does not, to my knowledge and research, buffer for those issues.