YouTube nearing a deal to buy video game streaming start-up Twitch
Gamers not only love to play video games — they also like to watch.
YouTube is putting on its game face by reportedly making a play to acquire Twitch, a hugely popular platform for video gamers that specializes in online live streaming so viewers can tune in as games are being played.
A deal, said to be imminent once the two sides hammer out final details, would help YouTube, the world’s largest video-sharing community, secure its foothold in the rapidly growing game-play video market. It also would further YouTube’s ambition to grow into a major alternative to cable and broadcast television, attracting not only viewers but big advertising dollars as well.
The long-term ad revenue from a Twitch acquisition could be massive, analysts said. With more than 45 million gamers monthly, Twitch caters to an attractive demographic: typically young, tech-savvy men who have time on their hands and money to spend.
“A lot of advertisers want that kind of guy, so it’d be a very reliable source of revenue for YouTube,” said James McQuivey, an analyst at Forrester Research. “YouTube has lots of videos, but not all viewers are desirable for advertisers and not all videos are so reliable in their delivery of a specific target.”
According to reports that emerged over the weekend, Google-owned YouTube is close to buying the game-play video-streaming start-up for more than $1 billion.
“YouTube is looking for eyeballs and I think they’re looking for the secret sauce — what has made Twitch so popular,” said Michael Pachter, a research analyst at Wedbush Securities who covers gaming.
YouTube already has a well-established presence in the gaming community, with gamers uploading previously recorded videos of themselves playing video games and sharing their strategies.
Twitch, however, specializes in live streaming games to spectators, sometimes with live commentary, much like a professional sports event on prime time.
Since launching in 2011, the San Francisco start-up has fostered a robust online social community where viewers can follow their favorite channels, chat with each other while watching content, and send and receive direct messages.
“Twitch, while not a household name, absolutely is a massive player in the Internet today,” said DeepField Chief Executive Craig Labovitz, an expert on big data and Internet traffic. “They absolutely own the video game market.”
Twitch said its collective audience watches more than 13 billion minutes of video a month, and individual users watch an average of 106 minutes a day. About 58% of Twitch’s users spend more than 20 hours a week watching videos on the service.
YouTube and Twitch declined to comment on a potential deal.
“Twitch would be able to take advantage of all the resources that YouTube already has in place in terms of being able to deliver live video and on-demand video to a global audience,” said Dan Rayburn, an analyst with consulting firm Frost & Sullivan. “That’s very hard to do with good quality and scale.”
Founded in 2005, YouTube became an Internet phenomenon thanks to lighthearted user-generated fare such as a sneezing baby panda or a baby biting his brother’s finger. It later became a platform for music videos and other professionally produced content.
YouTube is now a media juggernaut whose content is accessed on computers, mobile devices, gaming consoles and set-top boxes such as Apple TV and Roku.
Google doesn’t break out financial figures for YouTube. But an April report by ComScore showed that Google, driven primarily by video viewing on YouTube, ranked as the top online video content property in February with 152.8 million unique viewers.
As YouTube continues to evolve, analysts said they expect the site would try to target more specialized, niche communities with the overall aim of enticing major advertisers.
Shyam Patil, senior vice president at Wedbush, pointed to speculation that YouTube might want to acquire NFL Sunday Ticket, a subscription TV package that offers access to all NFL games. If YouTube manages to secure that deal, it would be a “huge win,” he said.
“If YouTube’s play is to bring TV ad budgets to its site, then they have to bring something equivalent in terms of brand-safe, premium content,” Patil said. “That’s what they’re going after.”
News of YouTube’s talks with Twitch was first reported by Variety, which cited unnamed sources and said the deal is an all-cash offer that would be announced soon. The Verge also independently reported the deal, saying the two companies are working out details concerning how independent Twitch would remain.
salvador.rodriguez@latimes.com
Twitter: @byandreachang @sal19
