Twitch, Amazon’s gaming-focussed live streaming platform, is preparing to lay off around 500 workers, or around 35 percent of its staff, Bloomberg reported this week. Citing sources familiar with the plans, Bloomberg reported that the cuts come as the business struggles with high costs related to its live streaming infrastructure. This would be the second round of cuts in less than a year – Twitch announced it had laid off over 400 staff last March.
Twitch’s monetisation model is well established. The platform runs ads on its creators’ content, and also takes a cut of paid subscriptions and other in-platform purchases which its streamers sell to their viewers. As part of Amazon, its ads business benefits from being connected up to Amazon’s popular buy-side tools.
Despite this, the platform remains unprofitable nine years after it was bought by Amazon, according to Bloomberg. Executives at the platform cite the high infrastructure costs which come from broadcasting around 1.8 billion hours of live video content per month as a key struggle (even though it benefits from Amazon’s infrastructure in this area too). Last year, the company announced plans to shut down operations in South Korea, due to ‘prohibitively expensive’ operational costs in the market.
A tough game to win
The company has attempted to finesse its monetisation model to steer itself towards profitability. This too has proven difficult, as proposed changes to its monetisation methods, which would reduce the cut received by streamers on the platform, have received a lot of backlash. So too have efforts to minimise monetisation methods which it doesn’t take a cut off, such as sponsorships which creators run themselves.
But keeping creators happy is key for the company – live streaming audiences tend to be loyal to specific creators, and will follow them if they change platforms. And there are other major options: notably YouTube, which has a well-established live streaming business, and Kick, which has attracted some big creators with generous pay packages.
Ultimately, the live streaming space is a tough one to win in. Others who have competed in the space have either dialled back efforts (such as Facebook Gaming) or bowed out completely (like Microsoft-owned Mixer), despite their high profile backers.
