January 23, 2020

Live Streaming: The Quiet Media Revolution

While cable-cutters, Netflix, and the stampede of competing services have dominated the news, another disruptive force in media consumption has kept below the radar of many media analysts – live streaming services. A huge but largely-unnoticed change is developing in this space that has the potential to influence a major part of media consumption in the coming decade.

Why has live streaming growth been so overlooked? The audience is young and the content is driven by video game players. (Twitch does not release data on how much of its audience is under 18, but only 55% of its viewership is 18-34.) Even those who do focus on this segment tend to put the spotlight on eSports, which is only a small part of live-streaming content. (According to StreamElements, less than 25% of the hours watched on Twitch were eSports or eSports brands.) But make no mistake—for younger viewers, Twitch and its livestreaming competitors are mainstream entertainment.

The fantastic sums earned by top streamers make for big headlines, but the real impact from live streaming is the collective force of the over three million individual creators who stream on Twitch every month, collectively driving fifteen million daily views and over 660 billion minutes watched in 2019. On any given day, the average number of concurrent viewers is over one million.

Twitch’s success led to its $970M acquisition by Amazon in 2014, and attracted numerous competitors including Microsoft’s Mixer and the startup service Caffeine (which took a $100MM investment from 21st Century Fox in 2018). Facebook and YouTube have also jumped into the space with their own live streaming services. 2019 saw an escalation in competitive activity, with rival services hiring away many of Twitch’s top streamers on multi-million-dollar contracts. These deals not only failed to make a serious impact on Twitch’s ratings, it also resulted in a huge drop in viewership of these streaming celebrities as they shifted to new outlets.

According to Adam Lieb, CEO of Gamesight, a software company that provides marketing and influencer technology to the games industry, “Every major streamer who has switched platforms has taken a massive hit to viewership, typically about 80%.” Lieb also points out that while some of the metrics that have been interpreted as showing competition have had an impact on Twitch viewership from streamer defections, they don’t consider seasonality. “If you look at Twitch’s year-over-year viewership, its numbers have grown, not shrunk.”

  • The authenticity of user-generated content combined with approachable celebrities;
  • Loyalty of an audience who follow their favorite streamers for hours every day;
  • Interactivity with streamers, who can respond in real-time to messages from fans; and
  • Multiple monetization models, including in-stream ads, branding/banner placement, premium subscriptions, and direct donations to streamers. Amazon’s integration with Twitch will continue to create new e-commerce opportunities and reward streamers who drive sales.

These services have enormous potential to grow their audience beyond gaming, as evidenced by the growth of Twitch’s “Just Chatting” channel and its broadcast of NFL Thursday Night Football games, hosted by Twitch’s own roster of superstar steamers. Q4 ‘19 marked a milestone for Twitch, as “Just Chatting” passed “League of Legends” to become its most-viewed channel, with a month-over-month growth of 14 million hours watched (source).

Twitch’s deep-pocketed competitors will continue to look for any opportunity to build their audiences. For the tech giants, the synergies they can develop with their incumbent businesses make the effort worth a strategic investment. Microsoft is using Mixer as a tactical tool for their Xbox and PC gaming businesses, and Google is promising deep integration of its Stadia gaming platform with YouTube—further blurring the line between viewing and playing—and even allowing viewers to jump in to a live stream and join the action. Amazon’s gaming ambitions can tie together their AWS and e-commerce business with Twitch as a way to ensure future generations stay in their ecosystem.

In spite of their competitors’ incentives, Twitch’s first-mover advantage may be insurmountable. Just as with YouTube’s vast content archive, the collective drawing power of their millions of individual creators serves as a powerful barrier to any newcomer hoping to attract viewers to any new content destination.

Mike Fischer is a veteran of the video and gaming industries, having held executive positions at Microsoft, Amazon, Epic Games, and Square Enix. He is also a member of the faculty at the University of Southern California.

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