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Business Operations Business Models

How Does Twitch Make Money (Business and Revenue Model)

The Twitch business model

How Does Twitch Make Money?
Here’s what you should know:
  • What is Twitch, and how does Twitch work?
  • How does Twitch make money?
  • Channel Subscriptions
  • Twitch Turbo
  • In-App Purchases (Bits)
  • Advertising
  • Twitch’s Subsidiaries, Acquisitions, and Exits
  • Twitch’s profit and revenue
  • What is the Twitch business and revenue model?
  • Twitch’s funding and valuation

How does Twitch make money? Here is a full, in-depth, breakdown of their four (4) revenue streams and the different products and services they offer, as well as the Twitch business model, their year-over-year revenue, and how Twitch works.

What is Twitch, and how does Twitch work?

Twitch, a subsidiary of Amazon.com, Inc., is a live video streaming service that focuses on content like video game live streaming, esports competitions, music broadcasts, and more.

Created in 2007 as “Justin.tv” by Justin Kan and Emmett Shear, Twitch later went on to become acquired by Amazon on August 25, 2014, for $970 million. Since then, Twitch has more than 30 million average daily visitors in over 230 countries.

How Twitch works is: Once a user creates a Twitch account, they can then do things like follow and subscribe to their favorite channels, get notified when an account goes live, and purchase and gift Bits. Users can also stream content on Twitch without an account, but all the features above are not accessible without creating an account.

Some of Twitch’s competitors include Youtube Gaming, Facebook Live, and other live video game streaming services.

Twitch App in Apple App Store | Twitch Business Model | How Does Twitch Make Money?
Source: Apple App Store

How does Twitch make money?

According to Twitch’s advertising audience page, there were 30 million average daily visitors, more than 7 million monthly unique streamers, and over 1 trillion minutes watched as of December 2020. So how does Twitch make money off of all these visitors, streamers, and time consumed watching content?

Below is a breakdown of how much money Twitch makes and its revenue model. Including all revenue streams and how much they charge for their services.

Here are the 4 ways of how Twitch makes money (in 2021):

Twitch has a revenue model that makes money in four (4) ways – channel subscriptions, Twitch Turbo, and in-app purchases, and advertising.

#1. Channel Subscriptions

One of the ways Twitch makes money is through channel subscriptions.

To date, there are more than 7 million monthly Twitch streamers, 100+ thousand concurrent channels per month, and according to Statista, an estimated 5.68 million subscribers by 2023.

Users can pay to subscribe to channels they like to watch on Twitch. Subscription costs vary based on tiers and each tier comes with its own set of channel perks.

Twitch Subscriptions Cost:

  • $4.99 to $24.99 per month per channel for tier 1, tier 2, or tier 3

Note: Amazon Prime members get tier 1 access for free. Given that Twitch is owned by Amazon, this is a prime example of an upsell / cross-sell business model.

#2. Twitch Turbo

Another subscription service Twitch offers and makes money from is Twitch Turbo.

Introduced on February 3, 2013, subscribing to Twitch Turbo comes with its own set of perks like Ad Free Viewing, Chat Badge, Expanded Emote Set, Custom Chat Username Colors, and Extended Broadcast Storage.

Twitch Turbo Cost:

  • $8.99 per month

#3. In-App Purchases (Bits)

Twitch also makes money by selling digital goods called Bits.

According to Statista, Twitch earned $219.27 million in revenue of in-app purchases in 2020.

Bits are used to support streamers by gifting them to streamers on Twitch. Bits are purchased and sold in bulk quantities of 100 to 25,000 and typically cost about 1 cent per Bit.

Twitch Bits Cost:

  • Bits purchases range in cost from $1.40 to $308

Note: Some other companies that also incorporate selling digital goods as a business model are TikTok and Reddit.

#4. Advertising

Lastly, Twitch makes money through its advertising business model.

While Amazon does not release Twitch’s ad revenue income, the last accurately reported numbers was roughly around $230 million in ad revenue for 2018.

Twitch offers a few ad placements for advertisers, they are Homepage Carousel, Homepage Headliner, Medium Rectangle, Super Leaderboard, and Twitch Premium Video.

Twitch Advertising Cost:

  • ranges in price from $2-10 cost per impression

Twitch’s Subsidiaries, Acquisitions, and Exits

Aside from Twitch being acquired by Amazon for $970 million, Twitch has made a total of 6 acquisitions of its own to date.

Twitch Acquisitions
Source: Crunchbase

Twitch’s profit and revenue

Amazon, the parent company of Twitch, has not released any official annual revenues of the company.

Note: Because Amazon.com, Inc., the parent company of Twitch, is a publicly traded company, under the Securities Exchange Act of 1934, they must file continuous financial filings with the U.S. Securities and Exchange Commission (SEC). You can find all of Amazon’s publicly released financial reports, including annual reports, through Amazon’s investor section on their website.

What is the Twitch business and revenue model?

Twitch makes money through a few revenue models that they combine within their company, they are:

  • Subscription business model
  • Advertising revenue model
  • Revenue sharing business model
  • Transaction based business model
  • Freemium (upselling) business model
  • Cross selling business model
  • Mergers & acquisitions (M&A) business model

Twitch’s funding and valuation

According to Twitch’s Crunchbase profile, Twitch has raised $35 million over 3 rounds.

Twitch was acquired by Amazon for $970 million on August 25, 2014.