WRAPUP 2-Amazon snaps up live video startup Twitch for $970 million

Mon Aug 25, 2014 5:13pm EDT

(Adds analyst comment, background on the deal)

By Deepa Seetharaman and Malathi Nayak

SAN FRANCISCO Aug 25 (Reuters) - Amazon.com Inc snapped up live-streaming gaming network Twitch Interactive for about $970 million in cash, marking the largest deal in the U.S. e-commerce company's 20-year history.

The move, announced on Monday by the two companies, is an unusual step for Amazon, which has tended to prefer building from within or making smaller acquisitions. It reflects Chief Executive Jeff Bezos' resolve to transform Amazon into an Internet destination beyond its core retail operations.

The deal is expected to close in the second half of the year. Amazon apparently beat out tech rival Google Inc , which was previously in talks to buy Twitch - launched in June 2011, one person briefed on the deal said.

Amazon has been spending more on original television and gaming content over the last several years. It will spend $100 million on original content alone in the third quarter.

"It's clear that Amazon will want to find more content that it can control," Forrester Research analyst James McQuivey said.

"Twitch is a good fit this way because it captures people's attention for hours a week and it also creates a product tie-in opportunity that Amazon can capitalize on in a way that Google could not," he added.

Twitch's format, which lets viewers message players and each other during live play, is garnering interest as one of the fastest-growing segments of digital video streaming, which in turn is attracting more and more advertising dollars.

More than 55 million unique visitors viewed more than 15 billion minutes of content on Twitch in July.

"Broadcasting and watching gameplay is a global phenomenon and Twitch has built a platform that brings together tens of millions of people who watch billions of minutes of games each month - from 'The International,' to breaking the world record for 'Mario,' to gaming conferences like E3," Chief Executive Jeff Bezos said in a statement.

Twitch raised $20 million in funding last September from game publisher Take-Two Interactive Software and firms such as Bessemer Venture Partners and Thrive Capital.

"We're keeping most everything the same: our office, our employees, our brand, and most importantly our independence," Emmett Shear, CEO, said in a blog post. "But with Amazon's support we'll have the resources to bring you an even better Twitch."

Investors have noticed Twitch's rapid growth, from some 3.2 million players when it initially launched in 2011. Some of its most-followed players rake in six-figure salaries through a 50-50 split in advertising revenue, $5 monthly subscriptions to livestream channels, and even spontaneous donations from fans. (Reporting by Deepa Seetharaman and Malathi Nayak; Editing by Leslie Adler, Bernard Orr)

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