May seems to be the month of billion-dollar deals, with Apple buying beats and AT&T buying DirecTV. Now, Google wants a piece of the action for itself with YouTube reportedly planning to spend $1 billion in cash to buy video game streaming website Twitch.tv.
Variety has reported that a a person familiar with the matter said that YouTube and Twitch have already agreed upon the $1 billion price. The two companies are working out the specifics of the acquisition before the official announcement of the deal. The person also noted that Twitch has rejected a number of offers from other companies, including Microsoft, which provides Twitch support for its Xbox gaming consoles.
Although Twitch isn't known much outside the gaming industry, the startup already generates more traffic than Facebook and Amazon during peak hours. With 45 million users, it is undoubtedly the world's biggest video-streaming website, but that's nothing compared to YouTube's 1 billion users. With YouTube as its parent company, Twitch will certainly find ways to manage its massive amounts of live global traffic.
"To be quite honest, we can't keep up with the growth. That's a good problem to have," Twitch vice president for marketing Matt DiPietro said in February.
Justin Kan and Emmett Shear of Justin.tv, a website that hosts live-streaming videos, founded Twitch in 2011. When Justin.tv's founders noticed that the site's gaming channel generated much more traffic than the rest of the other channels, they decided to create a spin-off that focused solely on gaming. Twitch then grew so big so fast that its founders decided to rebrand their company to Twitch Interactive. Twitch has raised $35 million in venture capital since 2011 from investors, including Alsop-Louie Partners, Bessemer, Draper Associates, Take-Two Interactive Software, Thrive Capital, WestSummit Capital and Venture Partners.
The concept behind Twitch is pretty crazy, and maybe that's why it has become so popular. The video game streaming service allows you to watch other people play games live. You might ask why you'd rather watch other people play when you could play the game yourself, but many people - millions, to be specific - like watching other people play to learn and to be entertained.
While Twitch is mainly a streaming service, it also allows you to record video streams so you can watch and re-watch them later and cut lengthy streams into shorter clips so you can focus on certain portions and discard others.
YouTube has its own live-streaming service, which it launched at the Game Developers Conference last year, but it never shifted into high gear. Twitch, meanwhile, owns majority of the video game streaming market.
Antitrust regulators are expected to place the reported acquisition under rigorous scrutiny, but sources say YouTube is willing to jump through the legal hoops to complete the deal.
