A decade later, Amazon’s $1 billion Twitch acquisition fails to pay off

In a bold move back in 2014, Amazon shook the tech world by acquiring the live-video startup Twitch for nearly $1 billion. At the time, the acquisition was viewed as a strategic leap into the exploding esports and online gaming market. Fast forward ten years, and the investment has become a money pit for the retail giant.

According to a Wall Street Journal report, Amazon continues to incur losses from its $1 billion investment, as Twitch, renowned for its lengthy video game session broadcasts, grapples with sluggish user growth. Meanwhile, employees are bracing for further layoffs and significant changes.

“Amazon.com paid nearly $1 billion to acquire the live-video startup Twitch Interactive in 2014. A decade later, the retail giant has received little financial return from one of its bigger acquisitions,” the Wall Street Journal reported.

Current and former employees familiar with Twitch’s financials highlight the ongoing issues told the Journal that Twitch remains a financial drain on Amazon’s resources. Despite enjoying periods of explosive popularity, the platform struggles with profitability.

The core of Twitch’s financial struggles lies in its high operating costs. Maintaining a robust streaming infrastructure and supporting content creators require significant investment. These expenses, coupled with intense competition in the live-streaming market, have impeded Twitch’s journey toward profitability.

In response to these challenges, Twitch has undergone several rounds of layoffs in recent months. Although the company has not disclosed exact figures, reports indicate substantial cuts across various departments, aiming to streamline operations and curtail costs.

“I’ll be blunt: We aren’t profitable at this point,” Twitch CEO Dan Clancy announced on the live-streaming platform in January, shortly after the company laid off around 35%, or approximately 500 employees. More recently, Twitch shut down its operations in South Korea, disbanded its Safety Advisory Council, and increased subscription prices for the first time.

But that wasn’t the only setback Twitch has faced. In 2021, a major data breach exposed the platform’s source code and disclosed the earnings of its top 100 highest-paid streamers. This incident further complicated Twitch’s path to stability.

The future of Amazon’s investment in Twitch hangs in the balance. While Twitch commands a vast user base and remains a dominant player in live streaming, its journey to becoming a profitable venture is still fraught with uncertainties. The next few years will be crucial in determining whether Amazon’s billion-dollar bet on Twitch will ultimately be a triumph or a cautionary tale in the annals of tech acquisitions.