Can Twitch Profit From Video Games Going Mainstream?

The growth of video game streaming is an opportunity for publishers and console makers, and Twitch is at the forefront of the genre.

Feb 23, 2014 at 9:00AM

In the late '90s my hobbies did not fit in with the hobbies of the mainstream. I like comic books, video games, and fantasy books. Over the course of the last decade, those things have become the mainstream. Spider-Man, Batman, World of Warcraft, The Lord of the Rings -- the list of things that my younger self was afraid to admit enjoying and that now everyone loves goes on and on. They made an Ender's Game movie, for crying out loud. With Harrison Ford!

In one of the more recent moves to bring the culture out of the shadows and into the bright lights of capitalism, gamers have turned to Twitch.tv to make semi-celebrities out of themselves while they play. Previously known as Justin.tv -- named for founder Justin Kan -- Twitch is a platform for gamers of all stripes and skills to broadcast their games live. Recent successes have helped raise the company's public profile and bring in a dedicated group of viewers and contributors.

Raising the profile of games
According to Twitch, its average viewer spends close to two hours watching the website each day. Those viewers have made Twitch one of the most popular websites in the U.S., according to Alexa rankings. They go to watch others play, and in doing so, they consume indirect advertising for the biggest games and consoles in the video game industry.

Sony (NYSE:SNE) saw the value in that advertising and community-building and launched its new PlayStation 4 with a "share" button on the controller that links to Twitch and other broadcasting websites. The games themselves are also getting a boost, with millions of viewers able to watch live and recorded play from consoles and computers.

Big-budget titles from Activision Blizzard (NASDAQ: ATVI) and others take up huge chunks of viewership, promoting themselves as they're played. Games such as World of Warcraft and the digital card game spinoff Hearthstone command thousands of viewers at a time. In a demonstration of its commitment to the medium, Activision recently announced an awards program for Twitch streamers, handing out $45,000 to the winners. 

Expanding on the premise
While the PlayStation is the only console that currently supports integrated streaming in the U.S., Microsoft's (NASDAQ:MSFT) Xbox One will soon give players a similar option. The functionality was announced before the console's launch, but has yet to be implemented. That's going to open up a whole new set of streams based on Xbox-exclusive titles and add to the core streams from cross-console games. 

When I talk to people about Twitch -- or even just the idea of streaming games -- a few "problems" come up. First, the number of viewers is still small compared to traditional programming. Second, it's not always clear to them that this can be a money-making operation. Finally, who wants to watch people play video games?

The final issue is easiest to address -- everyone likes to watch people play video games. Ever since we first had arcade games, players have stood around watching other people play because it's entertaining. Since the idea of streaming games is new, there aren't yet big games geared toward play with an audience. As the idea catches on, I expect that to change.

In terms of scale, it is a smaller operation, but there's lots of room for growth. A quote from then-CBS Sports President Neal Pilson in the early '80s makes a great parallel: "ESPN provides supplemental sports, but it is not a business force." Things change.

For monetization, the company sells ads, provides a premium subscription service, and allows users to support their favorite streams by subscribing to individual channels. Those cash flows have worked well for other businesses, and the sheer size and commitment of the customer base should keep Twitch running. If this keeps up, maybe one day I'll wake up and be genuinely cool. No. That's never happening.

Taking a chance on growth
Millions of Americans have waited on the sidelines since the market meltdown in 2008 and 2009, too scared to invest and put their money at further risk. Yet those who've stayed out of the market have missed out on huge gains and put their financial futures in jeopardy. In our special report "Your Essential Guide to Start Investing Today," The Motley Fool's personal finance experts show you why investing is so important and what you need to do to get started. Click here to get your copy today -- it's absolutely free.

Andrew Marder has no position in any stocks mentioned. The Motley Fool recommends Activision Blizzard. The Motley Fool owns shares of Activision Blizzard and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers