Amazon announced that it had acquired live-streaming video gaming network Twitch Interactive for the amount of $970 million in cash.
The deal, which involves retention agreements that will push the total amount to over $1 billion, is expected to close within the second half of this year.
The acquisition is the largest deal in the 20-year history of Amazon, and reflects Amazon CEO Jeff Bezos' ongoing campaign to transform Amazon from a retail company into a complete Internet destination.
"Broadcasting and watching gameplay is a global phenomenon, and Twitch has built a platform that brings together tens of millions of people who watch billions of minutes of games each month," said Bezos in a statement. "And, amazingly, Twitch is only 3 years old."
The acquisition of Twitch will allow Amazon to compete with Apple and Google in the online gaming industry, which represents over 75 percent of all sales of mobile apps.
"Twitch will further push Amazon into the gaming community while also helping it with video and advertising," said Ben Schachter, an analyst for Macquarie Research.
The format of Twitch, wherein viewers are allowed to send messages to players and to each other while in live play, is gaining interest as one of the fastest-growing methods of streaming digital video content. Its massive growth and potential is also, in turn, attracting increasing revenue from advertising.
While the value of Twitch is a given, Amazon's acquisition of the company is an unusual move for the e-commerce giant, as Amazon tends to create value from within the company or make much smaller purchases.
Google was previously in talks to acquire Twitch, but it was Amazon that was able to secure an acquisition agreement with the video game network company.
Twitch CEO Emmett Shear said in an interview that the company reached out to Amazon due to the funding and advertising sales expertise that it can provide to the startup.
"The reason why we reached out to Amazon, the reason I thought working for Amazon, having Twitch being a part of Amazon, would be a great idea for us (because) they would give us the resources to pursue these things that we honestly already want to pursue and they'd let us do it faster," said Shear.
There has been some criticism of Amazon's acquisition of Twitch, however, as the partnership of the two companies seem like a mismatch compared to the other rumored bidders that could have purchased Twitch.
While the purpose of the acquisition might not be very clear now, Amazon may have pulled the trigger on the deal in anticipation of a direction that the company was heading to down the line.
"Amazon doesn't do anything short term, so I wouldn't put it past them to acquire something now to dominate something five years down the line," Frost & Sullivan principal analyst Dan Rayburn said.
In the month of July, the Twitch network received unique visitors numbering over 55 million, which collectively viewed over 15 billion minutes worth of content.
