On Monday, Amazon reached a deal to buy Twitch, the online video game broadcaster, for nearly $1 billion. "What the hell is Twitch, and why is it worth a billion dollars?" asked everyone in America. Or so imagined the media, which rushed to the rescue with answers. Vox posted a nine-question explainer that began, "What is Twitch?" The New York Times followed suit with "What’s Twitch? Gamers Know, and Amazon Spent $1 Billion on It." Countless other outlets provided similar explanations. By Tuesday morning, it was impossible not to know what Twitch was.
But the real surprise is that many of us didn't already know what Twitch was. And when looking at the data on the video-game industry, it's easy to see why the largest video game streaming platform on the internet is worth so much.
1. Gamers are everywhere.
In the U.S., 59 percent of people play them. The average player is 31 years old, and 61 percent of them are under 35. While younger generations are growing up with computers and smartphones, baby boomers and Gen Xers are just becoming comfortable with gaming. But that segment of the market is growing fast—and not just among men. In 2013, the number of female gamers older than 50 grew by 32 percent.
2. Profits are astronomical.
Gartner, a technology research company, projects that worldwide video game revenue will surpass $100 billion this year and will grow to $111 billion in 2015. That includes mobile games, computer games, handheld video games and consoles. This market has seen rapid growth. According to Gartner, it’s market size was $79 billion in 2012. For comparison, box-office sales for movies totaled $35.9 billion in 2013, according to the Motion Picture Association of America.
3. Mobile games are taking over.
Smartphone ownership rates are growing fast. In 2011, 35 percent of Americans owned a smartphone. In 2013, 55 percent did. As the following graph from PricewaterhouseCoopers shows, that’s a big and growing revenue source for the industry:
Of course, the growth of mobile is not all good news for the video game industry as it has accompanied—some say caused—a decline in hardware consoles. Sales shot up last year when both Microsoft and Xbox released new consoles, the Xbox One and PlayStation 4 respectively, but as you can see from the following graph, hardware sales had been consistently declining before that.
4. Gamers are more addicted than ever.
In 2011, the average player spent 5.1 hours per week gaming. In 2013, that number rose almost 25 percent to 6.3 hours. More hours online means more money spent on games and in game accessories.
It’s hard to pinpoint why, exactly, gamers are playing longer, but smartphones and tablets may be part of the reason. In fact, gamers who play on a console are becoming more likely to play on a mobile device as well. “This multi-platform trend suggests that the introduction of new platforms isn’t cannibalizing gaming time,” the survey authors write. “Rather, it’s strengthening gamer engagement.”