Why Amazon Is Paying $970 Million for Twitch, in One Chart

Photographer: Tomohiro Ohsumi/Bloomberg

Customers raise their hands during a countdown at the launch of the Sony Computer Entertainment Inc. PlayStation 4 (PS4) video game console at the Sony showroom in Tokyo. Close

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Photographer: Tomohiro Ohsumi/Bloomberg

Customers raise their hands during a countdown at the launch of the Sony Computer Entertainment Inc. PlayStation 4 (PS4) video game console at the Sony showroom in Tokyo.

You may be surprised to learn that people post videos online of themselves playing video games. You may be even more surprised to learn people actually watch these videos, and Amazon.com is paying $970 million for Twitch, the website that hosts them.

While video-games-as-spectator-sport is a somewhat alien concept in many parts of the world, it went mainstream years ago in Korea. The top players are local celebrities, and thousands of people pile into arenas to watch these thumb athletes compete on the Jumbotron. There are channels on Korean television devoted to broadcasting StarCraft and other live game battles. Thirty percent of total time spent watching these kinds of videos globally is on TV, according to research firm IHS. The rest is online.

An IHS study published in May found that China has emerged as the largest market for Internet viewing of game videos, followed by the U.S. and Korea. People around the globe watched 2.4 billion hours of these videos last year, and now that Twitch is integrated with newer game consoles, that growth is expected to continue. See the chart below.

Twitch will help Amazon tap a growing global market, particularly in Asia, and a devoted fan base in the Seattle company's home country. Each Twitch user watched an average of 4.5 hours in July, according to data compiled by Bloomberg from Amazon's announcement. That's fast approaching YouTube's 6-hour-a-month average. Granted, Google's video site has far more users, but you can see why YouTube's parent was also interested in acquiring Twitch.

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