The Paltry Economics of Livestreaming

Despite having zero content production costs, the live-streaming platform Twitch is still losing money. How can this be?



#Wallstreetmillennial #twitch #livestreaming

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0:00 - 1:05 Intro
1:06 - 3:28 What is Twitch
3:29 - 9:11 Monetization
9:12 - 12:11 Content Delivery Costs
12:12 Viability of Live Streaming

[tayzonday]

There are definitely random mid-roll ads on Twitch now. Watching any “free” stream is 10-20% ads by time. You must pay for Twitch turbo or individual subscriptions to not see ads.

[gigitrix]

Fun fact that Kick uses AWS's turnkey streaming solution (IVS) which was productised from the original acquisition of twitch. Therefore on a certain level amazon wins whether people stream on Twitch or Kick, and it is almost certain that Kick is losing astronomical sums (as a loss leader to get kids gambling)

[kieranelliott]

A lot of things with paltry economics appear to last a long long time, which is impressive in a way.

[andromedach]

My favorite part of twitch is how many streamer believe they deserve a far larger cut of the subscription fees than they receive. Given how poorly the majority of streamers perform their is justification to have them pay to stream or to stream at higher bit rates. It is amazing how many channels have no one actually watching. Now twitch is an onlyfans gateway for some.

We used to pay for Turbo till they raised the price to higher than netflix and youtube and twitch forgets they do not offer true time shifting

[TiberianFiend]

At this point, I think Amazon is willing to lose money on Twitch indefinitely just to keep competitors out of the market.

[eXclusive]

The breakdown was super clear- Twitch is a play thing for Amazon.

[MateusChristopher]

The advertising model definitely has issues. They could just forgo it and let people do NSFW livestreams if they really wanted profit 😂

[unsaltedskies]

The reality is that Twitchs' top 10% streamers likely make up 90% of the revenue. The small creators get the worst deal and Twitch give up a disproportionate level of revenue to the most popular streamers.

[trumpetbob]

As someone with an accounting background, one question I have is how Amazon/Twitch accounts for the Prime Subs program. Does Twitch have to compensate another portion of Amazon for that program as an internal transfer (perhaps labeled a "marketing" fee)? Or, because Prime is essentially a "bundle, " does Twitch get a cut of each Prime subscription, only having to pay a portion out if someone uses it? (As a Prime member for a long time, I can't think of a time I actually used a Twitch subscription as it is valueless to me personally.) Probably more of an academic question but if you were looking at internal corporate accounting, it would be a consideration as it might also help Twitch given what I would imagine is a significant portion of customers who, like me, don't use that Prime Sub.

[FullLengthInterstates]

A channel like mine could not exist on any other platform. Twitch deletes vods after a relatively short period. Youtube is the only platform that lets small users upload massive videos as part of a long term content library. Video hosting isn't cheap, which is why I support all of youtube's efforts to improve their profitability, even if it means gutting the quality on some of the less watched videos. Thankfully, youtube is currently the long form content platform, and they seem to have the economics figured out for now.

[rmkensington]

I can't believe people sit and watch this crap all day

[aurious]

Advertisers are making a killing, the internet is the new cable and yet they spend only fractions on ads that they used to

[davidc]

I think that we are going to see the demise of many of these companies that don't actually money but were kept alive by Ponzinomics over the last two decades. The era of near-zero interest rates was a disaster in so many ways. So much malinvestment and waste of resources by venture capital funded unicorns.

[louisazraels]

can someone explain to me what they would need 1900 employees for to begin with? or ever 1000

[samsonsoturian]

It's like becoming an actor. It's easy to learn, a lot of people do it for fun, and a handful of people at the top make all the money. On average, streamers lose money.

[edvaira]

Twitch-Con just ended today in San Diego and the general consensus of both of my kids was, “Kind of a lame Comic-Con but they have cool panels…”…it was more useful as making a connection with content creators who are also on other platforms, mostly YouTubers

[JFirnQ]

Funny that Kick is now a thing... it started up because Gambling Streamers were getting in trouble gambling to kids on twitch, and Hot Tub streamers getting in trouble going too far... and Kick has no rules.

[viktorianas]

Am I old fashioned if I prefer gaming myself instead of watching random people gaming???

[klti]

The thing is, live video is very hard to optimize for. For VoD, you can leverage CDNs that cache the content as close to the user as possible, reducing the traffic you actually have to send out yourself across the internet backbone connections. You can't do that for live video. if 10000 viewers watch the same stream, twitch has to send out the same content at the same time in 10000 separate connections, eating the bandwidth cost for all of them.

There is a technology used in private networks (has been for a long time) called multicast IPs. The idea is, the source only sends out one data stream, and it gets split on every router in the chain of routers connecting receiving clients to the source, so you don't have multiple data streams with the same content on the same connection. But this protocol never really made it into the internet, it's mostly used for stuff like IPTV of ISPs, so they can save bandwidth internally.

[JordanShilkoff]

I’m surprised you didn’t learn that Amazon charges Twitch, its own subsidiary, the same bandwidth costs as it would any other non-Amazon company, which basically splits up and obscures the real profits that Twitch generates.