Updated: Amazon move to buy Twitch, which provides a live video game streaming community, in a move that would broaden the company's media and content ecosystem.
The acquisition of Twitch, reported by The Wall Street Journal following The Information, will cost Amazon $970 million. The primary takeaway is that the video game company will make Amazon more of a media company. Amazon has developed its own content, produced games, publishes books and has an advertising network. The return on these ventures are a bit fuzzy since they're not material relative to Amazon's core e-commerce business.
Twitch broadcasts people playing video games and the user generated content---gives Amazon an advertising avenue. Video game developers and publishers will want their games to go viral on Twitch's channels. That video game audience puts Amazon in the middle of distribution and promotion.
According to Twitch's ad pitch, the company has more than 55 million gamers gathering on the site each month.
In the end, Amazon's main goal---whether it's the purchase of Twitch, Zappos, GoodReads, Audible or any other property and Prime subscriptions---is to keep its customers engaged. With the right levels of engagement, Amazon will increasingly have more touchpoints to make a sale. That sale is increasingly digital content via hardware through the Kindle or Fire Phone, but Amazon moves plenty of hard goods as well as services on the consumer and enterprise fronts.
Add it up and Twitch is likely to run independently by Amazon with connections being added over time to the mother ship in Seattle. Twitch could be layered into Prime subscriptions or offer enough future benefits to make the Fire Phone more of a gaming centerpiece. It doesn't take a genius to see Amazon leading Twitch viewers to video game purchases.