Last Updated on 11/17/2022 by Dean
Twitch is owned by Amazon.com Inc, as it was acquired by the eCommerce giant in 2014.
Amazon has been Twitch’s parent company ever since. Under Amazon, Twitch has grown from 351k viewers (2014) to 2.64 million concurrent viewers in 2022.
One of the biggest changes Amazon made to Twitch is adding Twitch Prime Subs.
These Prime Subs allow viewers with an active Amazon Prime subscription to subscribe to their favorite streamer for free. Not only do Prime Subs get access to subscriber benefits but they also get to support the streamer at no extra charge to them.
According to our Net Worth Reports, about 30% of subscriptions on Twitch are Twitch Prime Subs. This additional source of income is one of the main reasons that streamers continue to stream on Twitch over YouTube.
Twitch streamers receive $2.50 for every viewer who subscribes through Twitch Prime.
How much did Amazon pay for Twitch?
Amazon bought Twitch for just a little under $1 billion in a bidding war with Google in 2014. The exact number Amazon bought Twitch for is 970 million dollars.
How does Twitch make money?
Twitch makes money in 4 ways:
- Advertisements on Twitch streams
- Cut from streamer subscriptions
- The sale of Bit donations
- Merchandise sales
Twitch makes money from advertisements displayed on Twitch streams of Twitch Affiliates and Partners. Twitch takes 45% of the CPM (Cost Per 1000 viewers) of their Affiliate streamers and has an Ad Incentive Program set up for Partner streamers.
Streamers have a lot of flexibility when it comes to advertisements displayed on their channel as they can choose between manual or automatic advertisements. Automatic advertisements are more profitable but more disruptive.
Twitch is currently encouraging streamers to add at least 3 minutes of automatic ads per 1 hour of streaming.
Viewers can subscribe to their favorite streamers for $4.99 per month. This gives them access to subscriber-only perks such as exclusive emotes, subscriber badges, ad-free watching, and more.
From these subscriptions, Twitch takes a 50% cut. Meaning that Twitch streamers make $2.50 for every subscriber they have. This is known as the 50/50 revenue split and has caused a lot of controversy for Amazon’s subsidiary because other platforms (e.g. YouTube) offer a more favorable 70/30 revenue split.
Twitch did have a 70/30 subscriber split for top-tier creators but this feature will disappear in June of 2023.
Viewers can donate to their favorite streamers using Twitch Bits as a way to support them. This process is called ‘cheering’. Before viewers can cheer, they have to purchase the bits beforehand and that’s where Twitch makes a profit.
Twitch bits go for $1.40 per 100 bits. When a bit is donated, the streamer will keep $1 for every 100 bits meaning that $0.40 or 40% of bit sales goes to Twitch.
Finally, Twitch makes money from merchandise sales through their ‘Loot Cave’. This loot cave is a US-only that sells Twitch-related merchandise.
How much is Twitch worth?
Since Twitch is owned by Amazon, Twitch’s stock is no longer on the stock market and instead has become part of Amazon’s stock. It is thus not possible to know how much exactly Twitch is worth.
At the time of writing, Amazon.com Inc is worth $1.03 Trillion.
Is Twitch profitable for Amazon?
Twitch is not a profitable company right now.
According to Businessofapps.com, Twitch made an estimated $2.6 billion in 2021. But from our own estimations, we found out it takes $2.6 billion just to run it’s servers. Not even including the cost of rent, events, staff, and more.
How did we gather this info? Well, we can’t take the credit since we used a formula discovered by Zach Bussy in 2019.
Below is the video if you are interested.
Bussy calculates the cost of Twitch’s servers using a formula based on STREAMED HOURS and WATCHED HOURS. These are numbers that can easily be extracted from Sullygnome.
These are numbers for 2021:
- Total Stream Hours: 916,797,633 Hours
- Total Hours Watched: 24,335,691,821 Hours
source: Sully Gnome
He then figured out how much it costs to Amazon’s servers. How? Well it turns out Amazon sells their servers as a white label package so everyone can pay to run on the exact same servers as Twitch does. (Of course, Twitch likely gets a discount but this will also be applied at the end.)
Here’s what Amazon charges everyone for using their servers:
- Total Data Per Hour: 4.175GB Ingest | 2.64GB Origination
- Live Ingest Rate: $0.03/GB
- Live Origination Rate: $0.05/GB
Now that we have all the data, we can do the math.
916 million streamed hours x 4.175GB x $0.03 Ingest Rate = $114,729,000
24 billion watched hours x 2.64GB x $0.05 Origination Rate = $3,168,000,000
In total, this amounts to $3,282,729,000. Of course, these numbers are what everyone pays for Amazon’s servers. So let’s assume Twitch gets at least a 20% ($656,545,800) discount. Meaning the total amount to run Twitch Servers is an estimated $2,626,183,200.
This is of course merely an estimation but it proves our point that it will take a lot more revenue to make Twitch profitable.
Is Amazon ruining Twitch?
As of late, Twitch is getting in hot waters with its streamers as the service seems to get less and less profitable for its creators.
Especially small streamers who could benefit from such an increase in their income.
Up until now, some of the top tier creators who had over 1,000 subscribers on Twitch had access to the more favorable 70/30 revenue split.
But this too is coming to and end.
Instead of making the 70/30 subscriber split available to all Twitch Partners, Twitch has instead slashed them for everyone. Even the top tier creators are going to lose their 70/30 sub split on June 2023. And until then, they will only be able to make $100k per year until their split degrades into a 50/50 split.
Why is Twitch doing this? Surely it can’t be good for their growth? Especially when YouTube is just around the block, picking up top tier streamers, improving their streaming platform and offering a 70/30 split to ALL creators? Well, Twitch is making these decisions because the company is not profitable.
As we found out earlier, Twitch can barely afford to run its servers.
By slashing the income of top-tier creators, Twitch can recover some of their losses.
With 100,000 subs, Kai Cenat will lose $1,071,440 in 2023 just from Twitch's sub split changes. Twitch needs to put every creator at a 70/30 split no matter what it takes. Creators like Kai are the most innovative in the game and deserve to be fairly rewarded for it.— Devin (@DevinNash) October 1, 2022
It’s a shame that Twitch has to resort to taking more money from its creators instead of focus on making their platform more profitable on their own. Twitch makes most of its money from advertisements. Why not work to increase their advertisements platform?
Right now it’s a shit storm. Ads are way too frequent and they aren’t targetted at all. At least if I watch a video on YouTube I will get an ad that is related to my interests.
Twitch’s currently advertisement strategy is based on QUANTITY over QUALITY. So Twitch creators have to turn on more ads to make just a small income from advertisements.
And Twitch streamers already make very little from advertisements and WAY more from subscribers. Twitch is really showing its greed here.
If you are reading Twitch, please work on IMPROVING your ads. And no, incentivizing streamers to ad EVEN more advertisements isn’t going to make up for the lack of a decent subscriber split, or miraculously turn your company profitable.