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For some reason, the people writing this newsletter are waiting for Twitch to take off. We keep thinking, ‘oh when is the moment I’m going to start watching Twitch streams because I know it’s not for gaming anymore.’

…and yikes. Because 50%+ of Twitch’s user base is above the age of 30.

And we realized…oh yeah Twitch is not taking off. We don’t use this. We don’t need this, and we’re getting into why this is happening and what needs to be done.

And what started off as a ‘F around and find out’ research rabbit hole, it comes to be that Twitch is a great example of a company that’s built something differentiated long enough to see its competitors fly by and its customers turn away.

btw- If you’re addicted to living under a rock, Twitch is a live streaming app/company where you used to stream video games but now you can stream almost anything.

Twitch: Losing the sauce

Twitch: success story pre-acquisition

So basically, Twitch was absolutely killing it in 2014. It was a fast growing video games streaming company and Amazon and Google were both vying for it. To their credit, both companies saw the potential for how profitable gaming could be, with all the in-game purchasing, and the ability to let communities grow organically, etc.

A lot of people outside of gaming didn’t know what it was, because gaming was and still is an insular category. You’re either in it or totally outside of it.

So when Amazon bought it in 2014, great. Amazon is a huge platform, and its edge over Google was that Twitch wouldn’t have to be a laggard being YouTube. Amazon would put Twitch front and center as its user generated content arm.

A billion dollar purchase price and 10 years later, we have stalled growth, and flat revenues:

What kinds of problems is Twitch facing?

Bottom line: Running a live-streaming company is expensive, and frankly, Twitch has always had problems with scaling up and keeping up with growth.

The Verge’s reporting from 2014

Now while Twitch saw incredible gains during the pandemic (highlighted below), coming out of the pandemic they saw a contraction in which they gave up almost all of their gains from in-app purchase revenues.

Twitch is also uniquely annoying with ads. like very annoying.

Wait you didn’t really answer the previous question?

Yeah, sorry we needed a segue to talk about Twitch’s lingering problems and pandemic-related contraction of their business.

So.

You have a 1-2 punch of giving up all your post-pandemic gains with an incredibly expensive service to run on the back-end….

…but you also have competitors nipping at your heels (or basically eating your feet).

TikTok’s explosive growth has eaten into everyone’s attention share, with users glued to the app for almost an hour a day (7 hours a week).

We couldn’t get clean numbers, but looking a the monthly time spent with streaming apps, this shows that TikTok and Youtube are clearly hammering Twitch when it comes to people’s attentions.

But also - and we’re not supporting this with any data. But if more than half of your user base is above the age of 30, don’t those users now have less hours to spend watching a livestream? Millenials are having children…not at historic rates, but they’re also growing up + growing out of things. We have to conclude by some measure of common sense that short form video is a more efficient dopamine hit than an evening/post-work hours spent on watching someone stream for an undefined period of time.

So…What can Twitch do?

We have one idea:

Use Twitch as an extension of the NBA media rights deal: Amazon signed a deal with the NBA to cover the plan tournament and regular season games. There isn’t a company that’s better position for alternative game casts. Get your best creators and start doing alternative casts until something works. This will help to expose the platform and its key creators to a blanket audience. NBA whore it out test out a bunch of shit.

None of this is investment advice, btw.

Have a great week!

Ahmed and Peter