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Why The Coronavirus Pandemic Could Be a Defining Moment For Amazon's Twitch

By Stephen Lovely - Apr 9, 2020 at 9:59AM

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Did you catch the (video) game last night?

It's a complicated time for Amazon (AMZN -0.97%). Markets are taking big hits as the COVID-19 crisis worsens and unemployment figures skyrocket. When most people can't go shop at stores and malls, tech giant Amazon's e-commerce business and delivery service are looking more essential, yet Amazon is also dealing with labor and public relations issues as it clumsily attempts to combat workers' organizing efforts. Amazon's Amazon Fresh food delivery service is newly vital for many customers, too, but the service is struggling to keep up with delivery demands.

In all of this, a clear bright spot for Amazon is its streaming media business. The new normal of social isolation and quarantining has led to a spike in streaming across a variety of platforms, including Netflix (NFLX 0.04%), Alphabet's (GOOG -0.41%) (GOOGL -0.38%) YouTube, and, of course, Amazon's streaming offerings. Of particular interest may be Amazon's e-sports-focused streaming service, Twitch.

A video game fan cheers at the screen while watching an e-sports event.

Image source: Getty Images.

Downstream of the streaming revolution

By just about every measure, Twitch is doing better than ever in the midst of this crisis. In the month of March, Twitch viewership rose 23% -- an absolutely massive rise for a service that was already pulling in nearly a billion hours of usage in a typical month. In March, Twitch viewers logged more than 1.2 billion hours watching video games.

One simple reason for Twitch's success is the stay-at-home streaming boom. Streaming is up for virtually every streaming service and platform in this crisis, and a rising tide lifts all boats.

As the crisis arrived in the United States, Nielsen predicted a 60% increase in TV watching during widespread isolation. We presumed that rise would be proportional for streaming services, and these predictions and assumptions have, so far, largely been borne out.

But there's more to Twitch's big month than just a general increase in streaming, and Twitch's resemblance to services like Netflix and Disney's (DIS 5.33%) Disney+ doesn't go much further than the fact that all are streaming services. Like Google's YouTube, Twitch's content is driven by its users; sign up for Twitch, and you can host your own streams as well as host others. Twitch is primarily focused on live streaming broadcasts of the sort that make up a part of Facebook's (META 0.33%) appeal (YouTube also offers live streaming, but its catalog has much more of an on-demand focus than Twitch's does). And Twitch is focused on games and gaming, including e-sports.

Twitch's relatively unique appeal -- live broadcasts of video games and gaming competitions, often created by the players and users themselves -- is well-suited to this moment in streaming.

The only game in town

One reason that Twitch's positioning looks great right now is its focus on e-sports. E-sports -- essentially just video games viewed as something akin to traditional sports -- have long been popular among younger viewers and in certain countries, like South Korea. Observers have long predicted that their popularity would one day rival that of the more traditional competition.

Whether or not an e-sports revolution has been ongoing is arguable; e-sports certainly still remain far less mainstream and culturally relevant in the United States and Europe than traditional sports do, and it's easy to find statistics that show how much more popular physical sports are among viewers than video games. On the other hand, high expectations may be masking something that would be pretty remarkable on its own: the fact that a peak audience of 3.9 million tuned in for the same League of Legends tournament in 2019, for example.

And if there were ever a big moment for e-sports, it's right now. The NBA suspended its season in mid-March, and the league may well cancel it entirely. The MLB season, once scheduled to start on March 26, is nowhere in sight. In Europe, soccer competitions have ground to a halt; in India, the cricket season has been postponed.

Sports fans have been left in desperation. Fans of competition have been watching classic games (Networks like ViacomCBS-owned CBS and Disney-owned ESPN (just two examples) are airing games from years gone by in lieu of canceled sports content) as well as a series of "marble race" YouTube videos, which have enjoyed a big surge in viewers from a sports-deprived audience that devours the videos with varying degrees of ironic amusement and grim desperation.

There are certainly plenty of traditional sports fans who will never become e-sports fans. But those who are open to e-sports may be driven to them now, and fans who liked both can now only watch one. When it comes to live competition between trained pros, video games are currently the only game in town.

A man plays video games

Image source: Getty Images.

Twitch and its competition

Speaking of being "the only game in town," Twitch is very nearly that in video game streaming. Going by hours viewed in 2019, top competitor YouTube Games holds a mere 22% of the market share to Twitch's 73%, while Microsoft's (MSFT -0.63%) Mixer and Facebook's Facebook Gaming have a meager 3% market share each. And Twitch is only widening its lead as streaming surges: the 23% March surge in viewing hours is unmatched by competitors. March saw viewing hour increases of 15.9% for Mixer, 10.7% for YouTube Games, and just 3.8% for Facebook Gaming.

It's all good news for Twitch. The video game streaming platform is sitting on top of e-sports and live video game streaming as a streaming surge makes that position more important than ever. It has a stranglehold on e-sports at a time when e-sports are the only sports around. If there was ever a moment for Twitch to grow its power and its audience, this is that moment.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Stephen Lovely owns shares of Amazon, Facebook, and Netflix. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Facebook, Microsoft, Netflix, and Walt Disney and recommends the following options: long January 2021 $60 calls on Walt Disney, long January 2021 $85 calls on Microsoft, short April 2020 $135 calls on Walt Disney, short January 2021 $115 calls on Microsoft, short January 2022 $1940 calls on Amazon, and long January 2022 $1920 calls on Amazon. The Motley Fool has a disclosure policy.

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