THE STATE OF TWITCH: Twitch used to be about this.
Now, it’s about this.
Female gamers in sports bras, ASMR streams that are actually about the visuals, and who
could forget the infamous hot tub streamers.
At one point in time, Twitch was fighting back on this type of content pretty hard.
They would perma ban streamers for the slightest of offenses, shadow ban their content, and/or
disable advertising for such channels.
But, over the years, Twitch has become more and more liberal.
In fact, they’ve actually turned to embracing more mature content.
For example, two years ago, they added the “hot tub” category into Twitch.
And more recently, they have even gone as far as unbanning streamers who were known
for pushing the boundaries like Indiefoxx.
I mean, her channel name itself has two xx in it, surely, that’s just a coincidence.
It’s not really surprising why so many streamers have turned to this content.
The bottom line is that it’s simply extraordinarily lucrative.
Take streamer Corinna Kopf for example.
She’s one of the biggest names when it comes to streamers with an OF, and when she switched
to OF, she made $4 million in the first month and a million the next month.
According to another streamer named Alinity, when she transitioned to OF, she made more
in a month than she would’ve made on Twitch in 10 years.
That’s not the say that they were making a small amount on Twitch itself though.
And given that Twitch get’s 50% of the revenue that streamers pull in through the platform,
it’s no wonder why they’ve turned to promoting this content, but at what cost.
There’s no denying that mature content is very much taboo even in western societies.
And how many parents would want their kids watching content on a platform that promotes
this.
Safe to say that it’s not that many.
It’s also likely that streamers will have a lot more hesitancy when it comes to using
the platform.
If Twitch becomes known for its mature content, and you simply want to stream gaming content,
it’s more than likely that you choose to stream on YouTube instead.
So, it looks like Twitch may be digging their own grave when it comes to the general audience,
but how did things get so bad.
I mean, there’s plenty of creators who do the same thing YouTube as well.
Likely the most notable example is Belle Delphine, but YouTube is by no means known for this
content.
So, here’s Twitch devolution from gaming and reaction content to not safe for work
content.
THE ECONOMICS OF TWITCH: Taking a look back, the downfall of Twitch
can actually be traced back to their more recent surge which was actually 3 years ago
at this point right at the beginning of the pandemic.
In April of 2020, Twitch’s streamers and viewership basically doubled.
Concurrent streams went from just over 50,000 to 100,000, and concurrent viewership went
from 1.4 million to 2.4 million.
This momentum carried into early 2021, but by the summer, Twitch was starting to show
the first signs of plateauing.
And now that we’re two years out, this trend is even clearer.
From a normal person perspective, this is by no means a problem.
Twitch had simply reached it’s pinnacle and it was starting to stabilize like any
mature company.
But, from Amazon’s perspective, this was a nightmare.
If you didn’t know, Amazon is one of the most infamous growth companies of all time.
In the past 13 years, they haven’t even had a single quarter of negative year of year
growth.
But, to achieve this, they’ve made some pretty massive bets.
In fact, they’ve basically sacrificed all trace of profitability.
They just reinvest everything they make and if they still have profit left over, they’ll
just keep prices the same until inflation catches up.
This is because the company strongly believes that your margin is their opportunity.
So, in theory, if they have no margin, no one else will have any opportunity.
And they very much ran Twitch with this same mindset as well.
Despite being a ginormous platform, it’s not clear if Twitch is or ever was profitable.
After all, it’s not cheap to stream and store hundreds of millions of hours of content.
This is the main reason that Twitch doesn’t really support 4K streaming.
It’s estimated that in 2019, it cost Amazon $1.8 billion to run Twitch, but they only
pulled in $1.54 billion worth of revenue.
The pandemic boom may have pushed Twitch into profitability but only slightly if at all.
And the problem is that these wonky economics only work if the company is constantly growing
at 20, 30, 40% per year.
Stagnation is seen as a catastrophe and Twtich hasn’t just been stagnating, they’ve actually
been declining.
In fact, in November of 2022, Twitch had it’s largest viewership drop in years of 10%.
Again, this isn’t to say that Twitch is dying, it was just cooling off from the pandemic
boom as people started doing other stuff again.
But, I think you can imagine the disgruntled faces of Amazon executives after seeing this
performance.
Why wasn’t Twitch growing?
TikTok was growing, Instagram was growing, and even YouTube which had been out for way
longer was growing.
What was Twitch doing wrong?
Well, the answer was that they simply appealed to a much more niche demographic due to their
business model.
Unlike most popular services today, Twitch actually makes most of their money from users
directly paying creators.
And there’s very few niches in which this sort of strategy works.
So, by nature, Twitch is limited in how much they can grow and they were left with two
options.
Either, they could focus on promoting free content and appealing to a broader audience
or they could cut costs.
Let’s just say, Twitch would aggressively choose the latter.
BETTING AGAINST CREATORS: Usually, platforms like YouTube are quite
generous when it comes to revenue sharing with creators and the reasoning isn’t rocket
science.
The more that creators make, the more that these platforms make, so it’s in their best
interest to align incentives and lock in creators.
This is why YouTube has been handing out exclusivity deals left and right and why Spotify paid
Joe Rogan $200 million to switch to Spotify.
But for a few years now, Twitch has been doing the exact opposite and the creators who gave
Twitch the confidence to do this were none other than Ninja and Shroud, two of the platform’s
most popular streamers.
You see, back in late 2019, Microsoft paid these creators a stupid amount of money to
switch to their streaming platform, Mixer.
They paid Ninja $50 million and Shroud $10 million.
At first, this was seen as a massive loss for Twitch.
Microsoft had literally bought out two of their biggest creators.
But, to most people’s surprise, Twitch’s viewership didn’t really go down after these
creators left.
And to make things even better for Twitch, Microsoft would actually shut down Mixer in
mid 2020 and both streamers would return to Twitch for free.
This was Twitch’s light bulb moment.
The bottom line was that these creators had no where else to go.
Sure, there are some exceptions like Ludwig who have been able to successfully transition
to YouTube, but for the most part, streamers only have one option: Twitch.
And according to former Twitch employees, the company would very much leverage this.
They would renew contracts with top streamers with less favorable conditions and they were
even rooting for top streamers to leave as it gave up and coming streamers more room
to grow.
Apparently, Ninja leaving gave room for 5 to 6 new streamers to take his place.
This was no doubt a new strategy for streaming platforms, but it was by no means a new strategy
for Amazon.
I’m sure you’re all familiar with the terrible working conditions of Amazon workers.
You’ve probably wondered why Amazon doesn’t just fix these issues to improve employee
satisfaction and retention.
Well, the answer is that they literally want employees to leave.
They want them to constantly churn.
Here’s the idea behind this.
Whenever you get a new job, you’ll probably work your ass off to build up a good reputation.
But, as you become more tenured, you’ll likely become more comfortable and settle
into a more normal working schedule.
Jeff Bezos sees this evolution as a march to mediocrity, so Amazon tries to avoid this
at all costs.
Instead, they want people to join Amazon, work a crap ton, see that no one recognizes
their efforts, and then leave.
This way, they can repeat this process with the next sucker in line.
There’s no doubt that this is a toxic strategy, but it’s worked for them quite well over
the past two decades and now they’re applying the same strategy to Twitch.
Hungry creators jump onto the platform and grind away at content hoping that just maybe
they can make it.
Once they make it though, they realize that Twitch isn’t actually all that friendly
and they either get burnt out or switch to YouTube.
This doesn’t really matter for Twitch though as there’s hundreds of thousands of creators
who would be happy to take their place.
While effective, this has made Twitch into the same meat grinder as Amazon.
TURNING TO NSFW CONTENT: All of these cuts on the creator side worked
out quite well.
In fact, Twitch is still actively cutting perks for creators.
In late 2022, for example, Twitch nerfed creators with a 70/30 revenue split down to 50/50 after
the first $100,000.
This was an espeically savage move because streamers were actually asking for all creators
to be boosted to a 70/30 model, but Twitch went ahead and did the exact opposite.
But, while all of these moves made Twitch less of a money pit, it didn’t solve Twitch’s
original problem which was stagnating growth.
What they needed was new creator generated content that appealed to a larger demographic
that people were willing to pay for directly.
There was really only one genre that accomplished this and that’s of course simp content.
To be honest, it’s not surprising why this content would perform so well on Twitch.
The platform is literally filled with decently well off anti social gamers.
So, it’s no wonder why these people ate up thirst traps and e-thots.
But, as we discussed, Twitch was actually resisting this content for the longest time.
It’s likely that they didn’t want to associate with this content or have it tarnish the brand
of Twitch or Amazon.
But, it seems like all of their worries flurried away when they saw that other platforms were
doing the same thing particularly Instagram and TikTok.
I mean, half the content on TikTok is crap like this.
And as for Instagram, let’s be honest, ain't no one following fitness models because they
inspire them to workout or something.
Even YouTube has turned to this type of content when it comes to shorts.
So, somewhere along the line, Twitch figured, if everyone else is doing it, why shouldn’t
we?
We should also mention that another risque website has blown up over the past couple
of years.
The success of this platform likely just motivated Twitch even more to make the switch.
And judging by the content on Twitch today, it looks like they’ve definitely made the
switch.
THE FUTURE OF TWITCH: Looking forward, it doesn’t seem like things
will get any better.
Just one month ago, Twitch’s co founder Emmett Shear stepped down as CEO, so now it’s
truly just run by a bunch of Amazonions who are looking for maximum growth and don’t
really care about the soul of the platform.
So, you can bet that Twitch’s creators policies will just get even less friendly, they’ll
become even more of a meat grinder, and they’re gonna embrace any avenue that allows them
to continue growing.
Of course, I don’t think they’ll turn to full on adult content, but with that being
said, I do believe that they’ll continue to push the boundaries in terms of what’s
acceptable for a mainstream platform.
And given that TikTok and Instagram are very much willing to do the same thing, Twitch’s
days as the gaming platform may very well be coming to an end and that’s the sad state
of Twitch.
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