Amazon snaps up video game service for $970m

Jeff Bezos is ramping up Amazon. com 's entertainment ambitions, buying video-game service Twitch Interactive in one of its biggest-ever acquisitions.

Amazon said it’s paying $970 million in cash for the online gathering place for gamers. The deal, which trumped Google’s pursuit of the startup, is worth about $1.1 billion when including retention-related payouts it is understood. The acquisition gives the web retailer an online forum of more than 55 million monthly active users, where people discuss games or watch others as they play. Bezos, Amazon’s chief executive officer, has made video games a focus of a strategy to add more entertainment services. The company operates a game studio in Seattle and has been luring software developers to build more video-game titles for its Fire TV set-top box, Fire Phone and Kindle Fire tablets.

"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," Bezos said in a statement yesterday. Bezos is spending on other media as well, including $100 million to produce TV shows to watch through Amazon's Instant Video service, a music-streaming service and a book-subscription plan. Amazon also struck a deal with Time Warner Inc. to carry HBO shows.

As Amazon competes for customers' attention, the programming adds value for users of its Prime membership and various devices, according to James McQuivey, an analyst at Forrester Research Inc. "All of these become that much more valuable when they are populated with Amazon content, whether it's Amazon TV shows, or live streams of somebody else playing a video game on Twitch," said McQuivey. "Every minute that you're involved in an Amazon- led experience is a minute you're not at Wal-Mart or not with Apple or Google. "

As any parent who has seen a group of teenagers sit around taking turns playing video game knows, they enjoy watching each other play. With Twitch, users can view and share clips of gameplay virtually, both for entertainment and to learn new ways to advance. Video-game publishers have taken note of the trend and are now building the capability to share to Twitch directly into their products. Twitch is highly valued because of its engaged audience and gives Amazon opportunities to sell advertising and to steer shoppers to its online store to buy a game, controller or other accessories, said McQuivey.

“It’s a community of passionate fans who spend money on video games and that’s what makes it a valuable audience for Amazon,” he said.

Amazon wasn't the only suitor. Google and Twitch were in talks earlier this year on a transaction that valued Twitch at about $1 billion, a person familiar with discussions said in May. As the deal with Google was being discussed, investment banker Frank Quattrone introduced Twitch to other potential bidders, one of the people said. Sally Palmer, a spokeswoman at Quattrone's Qatalyst Partners LLC, didn't return a call for comment.

The interest in Twitch shows that as people move more of their entertainment habits online and away from traditional television, the value has increased for online video companies with large user bases. Walt Disney recently agreed to purchase Maker Studios, an online-video distributor, for as much as $950 million. Entertainment Portfolio

“Cracking the code on how to build an audience with online video is increasingly hard to do,” Kurzweil said. “That is what Amazon is going after.”

Twitch, which is based in San Francisco and run by CEO Emmett Shear, is available via online streams and consoles such as Sony Corp.'s PlayStation 4 and Microsoft Corp.'s Xbox One. Started about seven years ago as Justin.tv, the service has evolved to where 1 million people shared videos in February. The company was initially billed as a way for people to share live videos of themselves.

Bloomberg