Amazon pays $970 mln for Twitch, nearly 10x last VC valuation

Amazon CEO Bezos arrives at annual Allen and Co. conference at the Sun Valley

(Reuters) – Amazon.com Inc snapped up live-streaming gaming network Twitch Interactive for about $970 million in cash, marking the largest deal in the U.S. e-commerce company’s 20-year history.

The sale price is close to 10 times the valuation Twitch received in its most recent round of financing, a $20 million Series C round in September 2013 that valued the company at $98.63 million, according to VC Experts.

The purchase, announced on Monday by the two companies, is an unusual step for Amazon, which has tended to prefer building from within or making smaller acquisitions. It reflects Chief Executive Jeff Bezos‘ resolve to transform Amazon into an Internet destination beyond its core retail operations.

The deal is expected to close in the second half of the year. Amazon apparently beat out tech rival Google Inc, which was previously in talks to buy Twitch, launched in June 2011, one person briefed on the deal said.

Twitch raised a total of $35.21 million over three rounds since it was founded in 2006 under the name Justin.tv, according to Thomson Reuters (Reuters’ parent company).

Investors in Twitch’s Series C round were Alsop Louie Partners, Bessemer Venture Partners, Thrive Capital Partners, Take-Two Interactive Software and WestSummit Capital Management, Thomson Reuters reports.

Alsop Louie, Bessemer and Draper Fisher Jurvetson financed Twitch’s $15.2 million Series B round in September 2012. That round valued the company at $56.15 million, according to VC Experts.

Alsop Louie was the sole investor in Twitch’s seed round. The dollar amount of that investment was unavailable.

Amazon has been spending more on original television and gaming content over the last several years. It will spend $100 million on original content alone in the third quarter.

“It’s clear that Amazon will want to find more content that it can control,” Forrester Research analyst James McQuivey said.

“Twitch is a good fit this way because it captures people’s attention for hours a week and it also creates a product tie-in opportunity that Amazon can capitalize on in a way that Google could not,” he added.

Twitch’s format, which lets viewers message players and each other during live play, is garnering interest as one of the fastest-growing segments of digital video streaming, which in turn is attracting more and more advertising dollars.

More than 55 million unique visitors viewed more than 15 billion minutes of content on Twitch in July.

“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 – from ‘The International,’ to breaking the world record for ‘Mario,’ to gaming conferences like E3,” Bezos said in a statement.

“We’re keeping most everything the same: our office, our employees, our brand, and most importantly our independence,” Emmett Shear, CEO, said in a blog post. “But with Amazon’s support we’ll have the resources to bring you an even better Twitch.”

Investors have noticed Twitch’s rapid growth, from some 3.2 million players when it initially launched in 2011. Some of its most-followed players rake in six-figure salaries through a 50-50 split in advertising revenue, $5 monthly subscriptions to livestream channels, and even spontaneous donations from fans.

(Reporting by Deepa Seetharaman and Malathi Nayak; Editing by Leslie Adler, Bernard Orr)

(Additional reporting and editing for peHUB by Lawrence Aragon)

Photo: Amazon CEO Jeff Bezos arrives at the annual Allen and Co. conference at the Sun Valley, Idaho Resort July 12, 2013. REUTERS/Rick Wilking

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