Founded in June 2011, Twitch is the world’s leading social video platform and community for gamers, video game culture, and the creative arts. The concept is simple, people that are good at a game make an account, play the game, turn on their camera and talk to their viewers (these people are called streamers).
Twitch’s phenomenal growth since 2011 has resulted from both direct and indirect network effects. First of all, there are strong cross-side network effects between Twitch viewers and streamers: the more viewers that come to Twitch, the more streamers are attracted to the platform by the prospect of gaining more fans, more subscribers, and ultimately more revenue from advertising and donations. In turn, as more streamers bring their content to Twitch, more viewers are drawn to the platform to watch and even interact with their favorite players and teams.
Secondly there is a second form of indirect network effects involving Twitch and third-party console manufacturers: driven by the large and growing number of Twitch streamers and viewers, console manufacturers Sony and Microsoft have chosen to incorporate native broadcasting functionality on Twitch into the PlayStation 4 and the Xbox One. Emphasizing the role of twitch in the console gaming industry.
Lastly, there are also direct network effects at play. As more streamers and viewers come to Twitch, the more interaction takes place in the form of live commentary and discussion among viewers and often even with streamers. Twitch has succeeded in creating a strong community of gamers who value the social experience of creating, consuming, and discussing game content together in real time.
How does Twitch make money? There are 3 main revenue models:
- They sell ads that are being displayed during the streams as well as banners around the site.
- Twitch gets a commission of all the viewers that subscribe to a channel. A subscription to a channel is 5 dollars per month.
- Sponsorship, game developers will pay twitch a fixed amount to be featured on the front page and have a stream of their newly developed game running on the front page.
The business model of Twitch.TV is very similar compared to their main competitor, Youtube Gaming. The main difference is that Youtube Gaming earns most of its revenue with video on demand. All streams can be automatically uploaded to the streamer’s youtube channel.
According to the COO of Twitch Kevin Lin, twitch will stay a gaming and creative arts platform. He believes that gaming is the core of the business, it’s where the passion is at, that’s the key differentiation of twitch. They’ll continue to grow and expand globally and hope to reach more and more people, especially in Asia where gaming is huge. If twitch keeps focusing on their core competence we believe it will stay a big player in the industry for a long time, especially because of their popularity and the constant rise in streamers. Furthermore if innovations in the industry like VR gaming are dealt with correctly, the future for twitch seems bright.
Team 68
Ming Li (376565)
Min Heng Lin (336451)
Elisabella Hu (371389)
