Amazon scoops video service from Google

August 25, 2014 11:52 AM

Jeff Bezos is ramping up Inc.’s entertainment ambitions, buying video service Twitch Interactive Inc. for about $1 billion in its biggest acquisition ever.

Amazon moved in to buy the online gathering place for video gamers after the startup’s deal with Google Inc. fell through, people with knowledge of the matter said. Amazon is paying $970 million in cash. Including retention-related payouts, the transaction is worth about $1.1 billion, said one of the people, who asked not to be identified because the talks are private.

The deal, the largest in Amazon’s 20-year history, gives the Web retailer an online forum of more than 55 million monthly active users, where people discuss games or watch other gamers as they play. Bezos, Amazon’s chief executive officer, has made video games a focus of a strategy to add more entertainment services.

Just as the company is beefing up its TV programming available to Amazon Prime members, the company operates a game studio in Seattle and has been luring software developers to build more video-game titles for its Fire TV set-top box, Fire Phone and Kindle Fire tablets.

“Broadcasting and watching gameplay is a global phenomenon and Twitch has built a platform that brings together tens of millions of people who watch billions of minutes of games each month,” Bezos said in a statement.

The deal also highlights the stepped up rivalry between Amazon and Google. In addition to battling for customers watching an increasing amount of video through the Internet, the two companies also are competing for business in online data storage and Internet advertising.

The deal was first reported by technology-news website The Information. Craig Berman, a spokesman for Seattle-based Amazon, didn’t return a call seeking comment.

Bidding War

Google and Twitch were in talks earlier this year on a transaction that could value Twitch at about $1 billion, a person familiar with discussions said in May. As the deal with Google was being discussed, investment banker Frank Quattrone introduced Twitch to other potential bidders, one of the people said. Sally Palmer, a spokeswoman at Quattrone’s Qatalyst Partners LLC, didn’t immediately return a call for comment.

Buying Twitch for $1.1 billion would be larger than Amazon’s acquisitions of Inc. in 2009, Kiva Systems Inc. in 2012 and in 2010. Amazon paid $817.3 million in stock for Zappos. Amazon hasn’t been a prolific deal maker like Google or other large technology companies, buying just 18 companies since 2012, according to data compiled by Bloomberg.

As people move more of their entertainment habits online and away from traditional television, interest has grown in online video companies with large user bases.

Entertainment Portfolio

Walt Disney Co. recently agreed to purchase Maker Studios for as much as $950 million, setting set off a rush among well-capitalized companies to invest in or acquire video companies that have a large viewer base.

Amazon is spending $100 million to produce TV shows for its Prime customers and introduced a music-streaming service earlier this year.

Twitch is available on Sony Corp.’s PlayStation 4 and Microsoft Corp.’s Xbox One game consoles. Started about seven years ago as, the service has a highly engaged audience of people who watch others play video games. In February, 1 million people shared videos via Twitch. The company raised $20 million from investors last year.

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