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The World According to Twitch: Winning With Experimentation

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If Twitch’s parent company Amazon has any influence, likely this problem will be solved in a number of sophisticated ways in the future. Until then, Twitch has work to do to figure out how to increase discoverability, says Eubank. “That’s why it’s so important that we do so many hours of broadcasting and that’s the grind that so many Twitch streamers feel. You’re only going to get discovered if you’re live.”

Twitch has created tools to allow broadcasters to either show video-on-demand (VOD) content or to play someone else’s live stream when they are away. But Twitch viewers prefer live content, says Eubank, and there’s not as many viewers for on-demand content.

Show Me the Money

Twitch itself is mainly supported by ads, with several other monetization options. The ad rates at Twitch are among the highest in OTT, according to one Twitch executive who preferred not to be named, adding that the company keeps raising rates and selling out in the U.S. Broadcasters receive between 50 percent and 60 percent of the ad revenue their streaming generates. They control the ad loads for their content, and can decide if they want to run ads on subscription content (most don’t).

SuperData Research reports that 35 percent of viewers use ad blockers, but 44 percent of U.S. viewers will pay for content via subscription or donation. From January to June 2017, independent software company Streamlabs says it processed around $50 million in tips for gaming streamers, with Twitch generating 96 percent of the tip revenue. Longtime viewers who have been watching a broadcast for 2 years or more tip the most, spending $81.10 in the first quarter of 2017, according to Streamlabs. Viewers in the 7–24 month range spent about $63, while new viewers spent $22.92, according to the company.

Streamlabs projects that it will process $100 million in tips in 2017, more than double the $43.6 million it collected in 2015. “More than 70 percent of streamers use some sort of tipping service. Streamlabs is the most-popular software, used by 63 percent of the Top 20,000 streamers,” says Ali Moiz, CEO of Streamlabs. “Tips via Streamlabs go 100 percent to the streamer. Streamlabs does not keep any cut.”

Twitch is the location of choice for the engaged viewer. The average amount of concurrent streamers online is 15,012 and the average concurrent viewer count is 743,632, the company says. YouTube Gaming has less than half that amount of viewers, and Periscope and Facebook are nowhere close.

Other Monetization Methods

Emotes are custom emojis that viewers access when they subscribe to a broadcaster’s channel, and different subscription levels give viewers access to a larger number of custom emotes. These are hugely popular and serve as an incentive for viewers to subscribe to streamers’ channels.

Cheering is another way streamers generate revenue. Cheering lets viewers use animated emotes that are purchased or won from Twitch to cheer on their favorite gamers, and the cheer emotes are available in different bit levels. Gamers get them and give them for all sorts of interactions, with 100 bits costing $1.40 to buy. Some streamers even have charity matching events based on bit donations.

Twitch is constantly trying out new monetization opportunities. Previously, streamers could produce their own T-shirts or personalized products to sell using a vendor Twitch worked with. That program was discontinued, but now streamers can get a commission when their viewers buy any of the games they promote or the gear they recommend via Amazon.

Against Harassment

One value espoused by almost everyone who talks about Twitch is that it’s a positive community where streamers and viewers alike find a place where they are accepted for their activities and interests. Twitch’s terms of service and community guidelines state what’s permissible. Individual broadcasters can also set their own specific rules for their channels. A typical set of rules might include some of the following: Do not be rude, vulgar, racist, or sexist; don’t bully; do not talk ill toward subscribers and those that donate; please refrain from talking about politics that aren’t relevant to the stream; or do not complain about bans or timeouts. All offenses are subject to bans without any prior warning.

Twitch enables broadcasters to enforce their own rules by giving them several moderation options. There are tools that allow broadcasters to ban specific words or links, and to enforce time-outs or to ban individuals. They also have AutoMod, which uses machine learning and natural-language processing to identify and block sexually explicit, aggressive, and profane content. “Creators [can] assign a moderator to police their chat and a 24/7/365 human moderation team [is available] to respond to reports of inappropriate behavior,” says Aragon. When rules won’t work? “We feature detailed guides in our online Help Center regarding how to manage harassment in chat and how to file a report.”

Crowdsourcing Development?

“If broadcasters are looking to make streaming their livelihood, then they will do a lot of research to increase viewability and engagement,” says Lee Massie, who was, until recently, head of business of development at Muxy. Muxy is one of the third-party developers that is creating the new technologies broadcasters need to provide a more sophisticated, interactive experience through polls, leaderboards, virtual pets, interactive overlays, mini games, music playlists, and game-specific tools. This new program that enables all this is called Twitch Extensions.

This approach to technology development is very Twitch-like, where the community is a very active participant in directing what’s needed. Twitch is publishing its Extensions roadmap to show what’s in the works. When asked about how the company will be reimbursing developers at a developer event in September, Ryan Lubinski, senior product manager at Twitch, replies, “We’d love to hear your idea if you’re a streamer or developer around what kind of business models you’re thinking about.”

Does crowdsourcing key technology tools make sense? In Twitch’s user-generated world, it seems to Twitch is multi-faceted—it’s a place for like-minded viewers to interact, a place where streamers can make a living streaming, a test ground for developers to try out new services, a valuable location for advertisers, a vast source of data collection based on site use, and a place to experiment with other forms of programming like content syndication and reality broadcasting. It is also an amazing sandbox for Amazon to see what works in this new media paradigm. All of this seems to be contributing to its growing adoption. “ComScore reported that Twitch is the 8th most visited site in the U.S. by average time spent per visitor (March 2017), up from #18 a year earlier,” says Chase.

Hello World, Meet Twitch

Twitch has shown that viewers like user-generated content with a high level of interaction. The engagement time of almost 2 hours a day, coupled with well-thought-out monetization options, has shown Twitch has a solid strategy for keeping broadcasters and their audiences happy and in business.

Twitch is now 6 years old and fully focused on ensuring that future generations will come to the platform. At the recent Twitch event, the swag the company offered to any pregnant woman in the audience was a baby onesie, showing they are clearly thinking about their future audience.

Twitch is not just a U.S. or even a North American phenomenon. Many features have been localized to other languages and there are also very active international broadcasters and audiences as well. Media companies everywhere should be watching what Twitch does.

Not everyone agrees on this point. Industry analyst Josh Stinehour of Devoncroft Partners is having a hard time wrapping his mind around Twitch. “I am not yet convinced of Twitch’s impact on the broader media industry,” says Stinehour. “User-generated content is a different market than premium content. There are some novel business model ideas coming from Twitch, though at present they simply don’t operate at an appropriate scale to replace existing revenue streams [for premium media].”

OTT may have transformed how people watch TV, but Twitch is transforming how younger generations think about media and entertainment. The challenge for old media is that content on Twitch is engaging. When viewers in the Twitch a la carte environment are willingly spending more than many OTT bundles, it delivers a clear message. The rules of the game have changed, and the old media models don’t really fit into the Twitch mold. It will be interesting to watch what happens as media companies worldwide go up against the expectations that Twitch is fostering. The world according to Twitch is opening up a whole new universe.

[This article appears in the November/December 2017 issue of Streaming Media Magazine as "The World According to Twitch."]

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