Amazon's key to profitability in Twitch acquisition

Samantha Bookman, FierceOnlineVideo

Amazon's (NASDAQ: AMZN) $970 million acquisition of Twitch is one of the most talked-about business deals this summer. How Amazon swooped in and nabbed the live-streaming service after months of talks with Google (NASDAQ: GOOG) faltered, and more importantly, why the retail giant bought Twitch, is generating plenty of comment. Much of it is outright confusion.

Why did Twitch grow so fast? What did Amazon see in the service? And for many people well outside their 20s, what is the appeal of sitting around watching someone else play a video game?

While some have speculated that the site's popularity is due to the rise in "e-sports," or whatever, I don't think that's the big factor. It's certainly influential; after all, Twitch started as just one channel on Justin.tv, which live-streamed all sorts of genres before shutting down unceremoniously a few weeks ago. But I think the key to Twitch's popularity, and the key to making it profitable for Amazon, lies somewhere else.

Back in college it was a ritual on Saturday mornings to gather in (or crawl into, depending on how your night went) a friend's dorm room and watch an admittedly silly show called Mystery Science Theater 3000. People who weren't fans of MST3K often said they didn't get it: You're listening to three silhouettes shouting banalities at the B-movies projected on the screen in front of them.

What non-fans didn't get was that for us, MST3K hit a communications touchstone. Before I discovered the series on Comedy Central, it wasn't unusual to loll in front of a TV set with friends late at night, watching Combat! and other black-and-white series or Godzilla movies, shouting out what we thought were brilliantly witty bon mots during particularly cheesy moments on screen. We all got the joke because we were already communicating in the metaphoric language of '80s and '90s pop culture.

MST3K was always more of a cult favorite than an outright hit, even though it did eventually get a movie deal. And the ghost of MST lives on in the online video world through Rifftrax.

Let's get back to Amazon's nearly billion-dollar buy of Twitch. Considering the story above, it's easier to imagine that Twitch, like MST3K so many years ago, is a cultural touchstone for many millennials. It's not just a "gamer thing," although Twitch is mainly for gamers; it's a way to communicate.

Someone from my generation could sardonically inject a sexually charged Leave It To Beaver reference into a scene of Godzilla stomping through Tokyo, and everyone in that cluttered dorm room would look at each other and grin, because we got it, and each other, at that moment.

While that isn't happening in the same way at Twitch (or maybe it is; there's a lot going on all the time on the site), clearly its users are communicating, through live streaming video and live chat, about a facet of culture that they love.

What Amazon is investing in is more than a good technology (and live, fan-driven streaming is a good technology). It's investing in an expanded way to communicate. Today's Twitch fans aren't just shouting at an unresponsive screen. They've been given a way to jump into the action--they're not just watching a game. The possibilities for Twitch spring from that foundation.

The only real question that remains is for Amazon: What will it do with its new prize, and the culture that comes with it?--Sam

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