"If I was running a manufacturing company I would be meeting with the companies that provided us raw materials."
Twitch employees are concerned that the streaming platform risks becoming a "zombie brand", and that further layoffs may lie ahead after nearly 1,000 jobs were cut from the company within the last 12 months.
A new report by The Wall Street Journal (via Eurogamer) reveals that Amazon paid $1 billion to acquire Twitch Interactive in 2014, but has received "little financial return" from the service in the ensuing decade. In brief, the report says that Twitch has always struggled to be profitable, even after significant growth following the launch of Fortnite in 2018 and again during the Covid-19 pandemic.
While Amazon doesn't provide official revenue figures for Twitch, internal documents viewed by the WSJ state the livestreaming service generated approximately $667 million in ad revenue and $1.3 billion in commerce revenue in 2023, amounting to less than 0.5% of Amazon's total revenue for the year.
The report points to Twitch's "challenging" business model as the primary cause, specifically the high infrastructural cost of supporting a large volume of livestreams, and the difficult nature of integrating advertising into long-form live video. Quoted by the Wall Street Journal, digital entertainment analyst Mike Hickey said "If you can't be profitable when you have a surge in demand, you have something structurally wrong."
More recently, Twitch's audience has been spending less on subscriptions and donations to creators, with internal projections suggesting the platform could "shed" $250 million in revenue by the end of next year. These ongoing struggles have now begun to result in layoffs. In 2023, Amazon laid off 400 workers from the streaming platform. This was followed by another 500 layoffs earlier this year, with Twitch CEO Dan Clancy stating that Twitch was "meaningfully larger than it needs to be."
Now, with Amazon expected to report its second-quarter results on Thursday, and an internal operations review due at Twitch this autumn, employees are worried that a third round of layoffs may be coming. Moreover, Twitch may end up becoming sidelined at Amazon due to its failure to live up to expectations, known as becoming a "zombie brand", with previous examples including Goodreads and Woot.
Employees have also criticised Clancy for embarking upon international work trips to meet Twitch Creators and host livestreams while laying off employees and remarking about unprofitability. Clancy responded by email to these employees, including his itinerary and stating his meetups included "medium sized dinners" with creators, adding "If I was running a manufacturing company I would be meeting with the companies that provided us raw materials as well as the companies that we sold our widgets to."
