Twitch and Online Streaming
Twitch started off as a part of on Justin.tv, a vlog-like platform that broadcasted co-founder Justin Kan’s everyday life. Twitch soon outgrew Justin.tv and the company rebranded entirely to what it’s known as today.
Twitch’s main demographic is the video gaming community, but its popularity has also attracted YouTubers, influencers, and mukbangers to engage with their viewers on the platform.
Twitch’s Business Model
Unlike ad-free Discord, Twitch has a very lucrative revenue-generating business model. Twitch has four main income streams: subscriptions, ads, in-platform currency, and merchandise sales.
Let’s take a closer look at each of them.
1. Subscriptions
Signing up for Twitch is free. However, the platform also has subscription model. The company offers three tiered paid options for users who wish to give more support to their favorite streamer.
Below are the subscription tiers to choose from:
Tier 1: $4. 99 per month. Tier 2: $9. 99 per month. Tier 3: $24. 99 per month.
With each subscription, you’ll have access to a range of added features on a streamer’s channel. They largely depend on what the streamer offers, but generally include things like custom emotes, ad-free viewing, and custom channel badges. Twitch takes a 50% cut from every subscription package.
2. Ads
Most Twitch streamers will plug in ads at the beginning of their pre-recorded videos. The revenue for this is calculated based on cost per mille (CPM) performance, which is the money that Twitch will pay to a streamer per 1,000 views of the ad on their channel.
Exactly how much Twitch takes from each ad varies from streamer to streamer; Twitch works closely with each streamer to nefgotiate a deal. Other factors that would also affect ad revenue include the ad space (is the ad a full length video or just an overlay at the bottom of the screen?), the ad’s keywords, and the industry that the company is in (healthcare or finance, for example).
3. Bits
Twitch has Bits, a digital currency unique to the platform. Bits allow users to buy Cheer, which are emoticons that allow them to express their support and enthusiasm to their favorite streamers in a more engaging way.
Twitch offers different price points for the number of Bits that a user intends to purchase. The more Bits used in a stream, the more they get to Cheer, and the more visibility a user gets. Twitch will also reward streamers $0.01 for every Cheer they receive from viewers.
4. Merchandise
Is Twitch Profitable? Yes, Kind Of
However, the number of people on the platform did not really translate to instant profits—at least not for the first couple of years post-acquisition. It was estimated that in 2017, Twitch brought in $102.5 million in ad revenue. In 2018, Twitch brought in $230 million. Both these figures were still far away from the company’s target of $500 million to $600 million.
Twitch Still Dominates Online Streaming
Considering the fact that the platform has a share of 73 percent in the online streaming market, it is only a matter of time that Twitch returns huge profits.
