How Amazon’s Twitch Makes Money

Twitch may be Amazon’s best-kept secret. Acquired in a 2014 bidding war with Google for $1 billion in cash, it is now the leading live video streaming service for gamers and game viewers.

Twitch is a platform for broadcasting, observing, and playing video games while interacting in real-time with players, game creators, and audience members. As such, it is a social media platform as well as an entertainment venue.

It made its name in esports gaming but has recently moved into a broader range of games, entertainment programming, and music. It doesn't hesitate to throw in offbeat selections like cooking shows to see how they do.

Amazon's Twitch Financials

Operated through an Amazon subsidiary now called Twitch Interactive, this platform and community for gamers makes money in at least four ways: through subscription fees, advertising revenues, merchandise sales, and a cut of the payments for the animated "bits" that participants buy to add some punch to their comments and reward their favorite players.

Amazon does not publish separate revenue figures for Twitch.

Twitch Advertising Revenue

Market research company Nielsen estimates that Twitch brought in revenue from all sources of about $2 billion in 2020.

That's a pittance of Amazon's total net sales of $386 billion in 2020, but it is a fast-growing pittance.

The parent company reportedly has set a target of $1 billion a year in advertising alone from Twitch. Most guesstimates suggest that it has not yet reached that level.

Twitch Subscriptions

Amazon's rebranding of Twitch as Amazon Gaming gives the app equal status among other Prime offerings like Prime Video. Similarly, membership in Amazon Prime includes some Prime offerings for free, with premium offerings costing more.

On Twitch, that means users can subscribe to individual channels, created and run by gamer hosts. As of 2021, channel subscriptions come in three tiers, for $4.99, $9.99, and $24.99.

The revenue is split 50/50 between the channel operators and Amazon.

Twitch Bits

Twitch bits are digital content that was created to build social engagement but is not to be considered nor used as currency.

The bits are animated emojis that users spend to cheer on their favorite gamers and reward them with real money. Purchased in batches starting at $1.40 per 100 bits, the channel creator gets a penny for every bit spent.

Also, if bits are used in certain extensions, the extension creator and developer will receive 20% of that penny.

Twitch Merchandise

Twitch has a "Loot Cave" that features a wide variety of sportswear and branded merchandise.

The store has been thoroughly folded into the Amazon ecosystem, complete with special Prime Day deals.

Amazon's Twitch Recent Developments

The COVID-19 pandemic was good to Amazon and to its Twitch service. Viewer numbers and time spent both hit records in March 2020 and kept rising into the middle of 2021, according to Twitch Tracker.

Twitch recently announced that it would be expanding its live streaming content beyond video games to include television shows and even a partnership with the NFL to stream 11 of its games.

The Bottom Line

Non-gamers may be puzzled by the success of Twitch, which attracts an audience of people who want to watch other people play video games. The NFL football audience may be equally baffling to non-fans.

Twitch even has its own superstars like Ninja, who has made the cover of ESPN online. Ninja is, in fact, one of about 1.5 million broadcasters who create their own channels in order to stream their games on Twitch, trying to attract an audience in order to score their slice of the advertising revenue, not to mention those Twitch bits.