When it comes to video games, Amazon.com (NASDAQ:AMZN) is not messing around. The company boldly states on its Amazon Game Studios website that it is "all-in on [video] games." It's understandable since the video game industry is growing about 8% per year and is expected to reach $143 billion by 2020.
Amazon already owns one of the leading game streaming sites in Twitch, which may be the most valuable asset in the video game industry right now considering the growing popularity of spectator gaming. Twitch sits right in the sweet spot of where gaming is trending -- socially connected, competitive gameplay.
Most importantly, as Amazon has grown in size, its spending on technology and content has also grown. With an ever growing stream of cash to invest, the sky's the limit for Amazon's video game ambitions.
Amazon has the technology to be a major player
Over the last few years, Amazon has been releasing software tools to help game developers make games. All of it integrates seamlessly with Amazon Web Services (AWS) and Twitch.
Amazon recently announced a new tool for video game developers called GameOn, which provides features for integrating in-game tournaments, leaderboards, and other multiplayer features in games.
Amazon also offers its own game development software called Lumberyard, which includes a full suite of features to create a big-budget game. Lumberyard is built on AWS, which provides the cloud infrastructure game makers need to connect many players together simultaneously for online multiplayer game modes.
Then there's Twitch, the popular game streaming site where people tune in to watch others play games, as well as broadcasts of esport events. Twitch's audience has grown larger than legacy TV channels like ESPN, according to SuperData. This is a very valuable asset for Amazon since every game maker desperately wants their games to reach as large an audience as possible, and Twitch is increasingly being seen as the place to make that happen.
AWS, Lumberyard, and Twitch make an attractive bundle for game makers. With Twitch, Amazon holds the keys to a growing $4.6 billion game streaming market that is causing video games to have a bigger impact than ever before on the world of entertainment.
While Amazon is happy to see developers take advantage of these offerings and flood Twitch with more content, Amazon Game Studios is currently making games of its own that targets the millions of viewers on Twitch.
Making games for a massive audience
Amazon Game Studios has hired several industry veterans that have worked on some of the most popular games in the industry. But there are still several job openings the company has available spanning various roles, including game programming, graphic artists, and managerial roles. In the last year, Amazon hired two former Electronic Arts (NASDAQ:EA) employees with experience designing games, and they will take lead game development roles at Amazon Game Studios.
Currently, Amazon is working on two offerings that are aimed at the type of multi-player competitive games that are growing in popularity, especially with streamers. One of these games is called New World -- a multi-player online battle arena (MOBA) game, which is one of the most popular genres on the esports scene.
The other game is called Crucible and is similar in format to Activision Blizzard's (NASDAQ:ATVI) Overwatch. With Overwatch League on its way to becoming one of the most watched annual esport events, Amazon is attempting to tap into the basic format that has made Overwatch successful. Like Overwatch, Crucible is a six-versus-six team-based shooter; however, Crucible introduces its own unique setting and competitive rules that distinguish it from Activision's game.
Amazon could potentially invest...whatever it wants
Amazon sees video games "becoming the largest entertainment form on earth." That's a bold statement from a company that has invested billions in Prime Video content to compete with other leading video content providers.
All of the software and services mentioned above, as well as Amazon's own views on where the gaming industry is heading, leads me to believe the online retail juggernaut is on a mission to be a major player in the video game industry.
But when we consider the massive amounts of money it could potentially spend on gaming-related content, Amazon just might dominate the industry someday. Consider that in 2017 Amazon spent $22 billion on technology and content alone, which includes payroll for employees working to design and develop new products and services. That's almost double the $12 billion the company spent in 2015.
Amazon can potentially outspend other dedicated game companies like EA and Activision where it counts the most -- talent. You can have all the fancy software and technology in the world, but what makes a great game is design and programming talent. Amazon has got the budget to lure some of the best in the industry, and that's why Amazon could dominate the video game industry.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. John Ballard owns shares of Activision Blizzard. The Motley Fool owns shares of and recommends Activision Blizzard and Amazon. The Motley Fool recommends Electronic Arts. The Motley Fool has a disclosure policy.