Twitch bringing ads back to Prime will not endanger its market share despite fan backlash

August 23rd, 2018 | /twitch-bringing-ads-back-to-prime-will-not-endanger-its-market-share-despite-fan-backlash/

SuperData’s principal analyst Carter Rogers believes Twitch shouldn’t worry about fan backlash over the decision to bring back ads to Prime.

When Twitch announced that Twitch Prime would no longer include advertisement-free viewing, vocal fans unsurprisingly responded with derision. However, threats to quit Twitch or unsubscribe to Amazon Prime over this will likely go down alongside other famous failed video game boycotts.

Previously, Twitch Prime users avoided ads for no extra cost simply by subscribing to Amazon Prime, which costs $119 a year. Now, they will have to pay for an $8.99 monthly Twitch Turbo subscription to bypass ads, nearly doubling the cost of ad-free viewing.

This will impact a substantial share of Twitch users and Twitch monetization itself. Among Twitch viewers in the US, over half (51%) utilize Amazon Prime services. Additionally, in 2017, ads generated 58% of the platform’s gaming video content (GVC) revenue.

Twitch is tweaking aspects of its business that affect 86% of revenue earned via the platform.

 

Twitch is likely feeling pressure to generate revenue as Amazon aims for global success across its entertainment divisions. Twitch is emphasizing non-gaming content in a push to generate more mainstream appeal. In September, it will split its IRL (in real life) and Creative categories into 13 separate genres including Food & Drink and Travel & Outdoors. These categories will make the platform more attractive to advertisers by offering a wider range of potential watchers. Newcomers may raise the average age of the Twitch audience, which stands at 29. Older viewers could also be less likely to utilize ad blockers, which 33% of Twitch viewers in the US currently use.

Despite negative feedback from the Twitch audience, this will not likely be enough for competitors like YouTube, Facebook, and Mixer to substantially grow their market share. What sets Twitch apart is personalities like Tyler “Ninja” Blevins, who react to their audience and the game in real time. For 35% of Twitch viewers in the US, a streamer’s personality is the main reason they watch a particular channel. Fans are unlikely to jump ship to new broadcasters on other platforms. The changes will not directly affect major streamers, either. Twitch Partners (the biggest broadcasters) get a share of advertising revenue and can also turn off ads for their subscribers. Going forward, they’ll be able to tout ad-free viewing as a reason to subscribe.

However, Twitch is not invincible. It could lose market share to YouTube and other competitors if changes to Twitch Prime directly affected major content creators. Twitch Prime users can give one free subscription a month to a streamer of their choice. This feature is so popular that Twitch Prime subsidizes roughly two-thirds of all subscriptions on the platform. At the same time, YouTube has been taking steps to give creators more ways to monetize. In June, it expanded the number of channels eligible to monetize via paid subscriptions and began offering built-in merchandise stores on channel pages.

Twitch mainstays like Ninja, Myth, and Shroud have become the rockstars of the games space, each attracting millions of followers. While bringing back ads to Twitch Prime subscribers will not please many watchers, rival platforms will need to lure away creators themselves before being able to compete on the same level as Twitch.