One of the most surprising deals of the year occurred this August when Amazon bought the video game streaming website Twitch.
The first reason for surprise is the nature of Amazon’s business – it began as an online bookstore and expanded to cover almost every product imaginable. The second reason comes to light when you look at who Amazon was competing against – Google. Google seemed like a far more sensible buyer given it already owns and runs the popular website YouTube and Twitch’s services are not all that dissimilar – a combination of the two businesses would have made commercial sense. Furthermore, whilst the spending power of Amazon is epic (the company is worth approximately $100 billion), this is only half the size of the mighty Google which is estimated to be worth $204 billion. The third and final surprise: Google offered a nice round $1 billion for Twitch, which was rejected. One of the reasons behind this? Twitch did not want to merge or play second string to YouTube.
With Amazon at the reigns, Twitch would be at the forefront of the business’ growing games branch and this certainly stands them in far better stead, rather than being swallowed up by Google.
There could also have been heavy legal ramifications for Google had they actually purchased Twitch. With Google already owning YouTube, it could easily be argued that with Twitch on their business roster there would be a negative impact on fair competition. In discussions, Twitch and Google could not agree on a break-up fee if any competition law rendered the deal void. With this revelation, perhaps Amazon seemed the more viable option and when looked at in greater depth, it does seem the right choice.
Amazon’s games branch is growing – in their press release regarding the takeover, Amazon’s CEO Jeff Bezos described Amazon as a “believer in the future of gaming”. This certainly seems to be the case; in 2012 they created a gaming studio as well as acquiring various famous developers and game designers. Furthermore, on the PC gaming front it is the second largest digital distributor of games. With its distribution abilities and growing inroads into the gaming community, suddenly, Amazon seems like a natural home for Twitch.
The deal is expected to close in the second half of this year however American firm Latham & Watkins has begun representing Twitch with a corporate team from their Silicon Valley based office. Twitch’s in-house lawyer Elizabeth Baker began her career as a solicitor at Latham & Watkins and sought their outside counsel. Amazon meanwhile turned to another hugely successful American firm Debevoise & Plimpton who fielded a well-rounded team comprising of a tax, an employee, an IP and two litigation partners.
It certainly seems Amazon is taking no chances with its new business protégé and why would they? Twitch is a mere three years old, young even by the standards of an internet company, and yet it is managing to attract 55 million visitors every month with an average of 100 minutes spent by each visitor on the website. Twitch is set to become one of the biggest players in the ever growing internet world. With Amazon’s distribution resources and the $970 million price tag being paid in cash, Twitch looks set to conquer the gaming world; much like its customers are conquering their respective games.