Twitch, the popular streaming platform acquired by Amazon for $1 billion in 2014, is facing significant challenges in terms of profitability. Despite experiencing growth following the launch of Fortnite in 2018 and a surge in users during the Covid-19 pandemic, Twitch has struggled to generate substantial financial returns. Internal documents viewed by The Wall Street Journal indicate that Twitch’s ad revenue amounted to approximately $667 million in 2023, while commerce revenue reached $1.3 billion. However, this revenue accounted for less than 0.5% of Amazon’s total revenue for the year, highlighting the platform’s ongoing profitability issues.
One of the primary reasons for Twitch’s profitability challenges is its high infrastructural cost of supporting a large volume of livestreams. The platform’s business model, which revolves around hosting live video content, has proven to be financially burdensome. Integrating advertising into long-form live video has also posed difficulties for Twitch, further contributing to its struggle to turn a profit. Digital entertainment analyst Mike Hickey noted that if a company cannot be profitable during a surge in demand, there are likely structural issues at play, indicating deeper-rooted problems within Twitch’s operational framework.
Recent projections suggest that Twitch’s audience is spending less on subscriptions and donations to creators, leading to a potential revenue decline of $250 million by the end of the next year. As a result, Amazon initiated layoffs at Twitch, cutting 400 jobs in 2023 and an additional 500 earlier this year. Twitch CEO Dan Clancy acknowledged that the platform was “meaningfully larger than it needs to be,” hinting at the necessity for cost-cutting measures. With Amazon’s second-quarter results looming and an internal operations review scheduled for autumn, employees are apprehensive about the possibility of further layoffs.
There are growing concerns among Twitch employees that the platform may be on the brink of becoming a “zombie brand” within Amazon’s portfolio. Previous examples such as Goodreads and Woot have been sidelined within the company after failing to meet expectations, raising fears that Twitch could suffer a similar fate. Employees have criticized CEO Dan Clancy for continuing to engage in international work trips to meet creators and host livestreams while overseeing layoffs and discussing the platform’s lack of profitability. Clancy defended his actions by likening them to essential business meetings in other industries, emphasizing the importance of maintaining relationships with key stakeholders.
Twitch’s financial struggles and recent layoffs underscore the challenges facing the platform in achieving profitability. As Amazon evaluates Twitch’s performance and operational efficiency, employees are bracing for potential job cuts and a reevaluation of the platform’s strategic direction. The coming months will be critical for Twitch as it navigates its position within Amazon and seeks to address its underlying profitability issues to avoid being relegated to the status of a “zombie brand.”
Leave a Reply