By Sam Byford and Ben Popper
YouTube is indeed close to securing a $1 billion buyout of live-streaming service Twitch, and will have fended off multiple suitors including Microsoft if the deal goes through, according to people with close knowledge of the talks. The two companies have agreed on a price and are working out details such as how independent the Twitch company and brand will remain, said one person close to the deal who asked to remain anonymous. Twitch is said to have evaluated possible bids and decided on Google's YouTube as the best fit to help the company scale in line with its massive growth over recent years. Variety first reported details of the talks.
Twitch is said to believe that Google can help the company become what it wants to be — the definitive platform for watching and streaming live video gaming. The company raised $20 million from investors in 2013 and is likely to turn a profit this year. But capital isn't enough to allow Twitch to scale its technology and infrastructure to keep pace with its growth. It had plenty of offers from venture capitalists looking to give it more money, said the source, but what it needs is a partner that can help it handle massive amounts of live and user-generated video on a global scale. Despite not being well known beyond gaming circles, Twitch already pushes more traffic during its peak hours than titans like Facebook and Amazon. "To be quite honest, we can't keep up with the growth," Twitch marketing VP Matt DiPietro told The Verge last year, adding "That's a good problem to have."
Twitch already pushes more peak traffic than Facebook
Microsoft and others have made serious approaches to Twitch, said the person, but YouTube was deemed the better fit. It's unlikely that the gamer-friendly Twitch would have wanted any part of a deal that would tie the service to Xbox, as it's embedded in Sony's rival PlayStation console as well. A source familiar with the deal says that Twitch likely would have rejected a billion-dollar offer from other companies, but was willing to accept it as part of a partnership with YouTube.
YouTube dipped its toe into the game-streaming waters by introducing an API at last year's Game Developers Conference, but the effort never got much traction in the community — it only opened live streaming capability to all in December. Twitch, meanwhile, has huge mindshare among the video game audience, as evidenced by its role as the streaming platform for all major e-sports tournaments, giving it command over a lucrative advertising demographic. The proposed deal can be compared to Facebook's $1 billion acquisition of Instagram back in 2012, where an established giant snapped up a fast-growing startup it saw as a potential competitive threat.