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5 Things You Need To Know About Twitch's Sale To Amazon

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Amazon (NASDAQ: AMZN) officially announced that it had acquired Twitch for $970 million this week.

The deal came weeks after reports indicated that Google (NASDAQ: GOOG) (NASDAQ: GOOGL) would acquire the firm.

"I think it's a great move by Amazon," Dan Sahar, co-founder and VP of Product Marketing at Qwilt, told Benzinga. "I think it's probably the largest acquisition that they've ever made. It goes to show that they're really serious about video, and it's a very wise acquisition on their part."

Needham analyst Kerry Rice referred to the acquisition as "reasonable" and "interesting."

"I think it adds to their content," Rice told Benzinga. "Also, they're doing some game development. It might have drive demand for that as well. Obviously it generates a lot of traffic. I think it's all pretty positive for Amazon."

What else should you know about the Twitch acquisition? Read on to find out.

Related Link: Disney Vs. Amazon: Who Will Win?

1. Twitch's Popularity Continues To Rise

As of August 18, Twitch was the fifth most popular online video site in the United States, accounting for 1.7 percent of all streaming traffic (by volume). Twitch sits behind Hulu, Amazon, Google (YouTube) and Netflix (NASDAQ: NFLX).

twitch_rank.jpg

Image Credit: Qwilt

Last spring, Twitch's volume was at 1.6 percent. This slow growth may not sound overly impressive, but the company spikes significantly whenever a major event occurs.

Globally, Twitch is a rising star. It is also the number-one live streaming site in America.

2. Amazon's Purchase Secures Its Spot Near The Top

Now that Amazon has acquired Twitch, the company's total volume (Twitch + Prime) has jumped to 5.7 percent.

"It's a distance from Netflix, but they're…a clear number three in this market and growing on both the live and VOD," said Sahar, who believes that Amazon has a shot at competing against Google and Netflix.

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3. There's A Long-Term Play Here

"I think there's maybe a longer-term play that they're thinking of where going beyond the community of gamers, what you have is a platform for broadcasting live events," said Sahar. "That live event can be anything. It doesn't have to be online gaming, which means that if you're looking a few years out, somebody is going to make a play for major league sports as a platform to broadcast that."

Sahar recalled the reports that Google once went after the NFL.

"There could come a day when guys like Amazon and Google and maybe somebody like Netflix say, 'We have the platform, we have service worldwide, we have proven capacity to deliver that -- let's use it for a major league sport,'" said Sahar. "I think Amazon is now in a great position to do that. Before, they didn't really have that reach."

4. More Games, But Not Many More?

Rice expects Amazon to continue its push into gaming, but it might not be the main area that the company wants to tackle.

"I think they have a couple development groups on games," he said. "I expect that to continue to be an investment area for them…[a] relatively small [investment]."

5. Games + Content = ?

Rice also believes that Amazon will now focus on figuring out how video games fit into the rest of its content plans.

"I think content is a big investment for Amazon," said Rice. "I think gaming is one component of that. I don't see it being the primary component, but I think it is a very popular vertical, so to speak, and one that Amazon wants to participate in. I think they will continue to make investments there. But it's not gonna be their lead. They're not gonna lead their content push with gaming, I don't believe."

Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.

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