One technology giant’s loss is another’s gain.
In May, Variety first reported that Google GOOGL -0.33% was in talks to acquire video game streaming company Twitch for more than $1 billion. Three months later, that deal is dead and Amazon.com AMZN +0.73%confirmed on Monday that it’s purchasing Twitch for approximately $970 million in cash.
Google was unable to close the deal, said sources familiar with the talks, because it was concerned about potential antitrust issues that could have come with the acquisition. The Mountain View, Calif. company already owns YouTube, the world’s most-visited content streaming site, which competes with Twitch to broadcast and stream live or on-demand video game sessions. One source noted that because of the concerns, Google and Twitch could not come to an agreement on the size of a potential breakup fee in case the deal did not go through.
Representatives at Twitch could not be immediately reached for comment while representatives at Google declined to comment.
“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,” said Amazon CEO Jeff Bezos in a press release. “Like Twitch, we obsess over customers and like to think differently, and we look forward to learning from them and helping them move even faster to build new services for the gaming community.”
Neither Twitch nor Google ever publicly confirmed that it was in acquisition talks, but various publications confirmed the deal was pretty much sealed last month. Monday’s reports suggest that was far from the case, as Amazon looks to add to a growing media empire that it’s established with several online television shows and a set-top content streaming box, Fire TV, launched in April.
Amazon is not known for making large acquisitions and a deal for Twitch could rank as largest in its 20 year history. That record was held previously by the company’s purchase of Zappos, which came in at around $850 million at the time the acquisition was announced in July 2009. With add ons, Amazon could potentially pay up to $1.1 billion for Twitch when the deal closes, which is expected to happen in the second half of 2014.
Missing out on Twitch, which now has about 50 million monthly viewers, would represent another high-profile acquisition miss by Google. The company also pursued mobile messenger WhatsApp before it was bought by Facebook for $19 billion in February. In July, the Wall Street Journal reported that Google was also looking to buy music streaming service Spotify for around $5 billion before it got cold feet over the the final price.
Having faced a number of antitrust inquiries in its home country and abroad with regards to its search technology, Google has to feel like it’s “prone to being under a microscope” said Geoffrey Manne, executive director of the International Center for Law and Economics. Manne noted that it was not a foregone conclusion that the two companies–one, whose subsidiary mainly deals with video clips, and the other, which deals with live streaming of video game sessions–were in direct competition. However, he speculated that Google simply wanted to be cautious, possibly thinking that any deal was a bigger risk than its acquisition target and therefore arguing for a lower “kill fee.”
While some reported that a deal between Twitch and Google was practically complete, Bessemer Ventures Partners’ Ethan Kurzweil, who led his firm’s investment in Twitch and sits on its board, denied that was the case. While Google was one of the first to approach the company about the deal, Kurzweil noted that there were other suitors involved after Twitch fielded the initial interest from the search giant. BVP led by Kurzweil and David Cowan explored other possibilities and hired notable Silicon Valley banker Frank Quattrone of Qatalyst Partners to open up acquisition talks with other companies.
“A lot of people were interested but Amazon offered the best deal,” said Kurzweil, who did not name the other interested parties.
While Monday’s press release from Amazon heaped praise on Twitch’s dominance of online video game broadcasting, Kurzweil speculated that the Seattle company’s interest will expand far beyond gaming and possibly into the online streaming of other activities.
“We think that Amazon is investing here in Internet infrastructure and something more than gaming media,” he said. “What Twitch has really built here is a video-based community around any activity… You have to ask Amazon what kinds of plans they have for that kind of investment, but if you look at technical assets in the company it goes beyond the gaming vertical.”
Update August 25, 2014 at 3:40 pm PT: An earlier version of this post suggested that Amazon’s acquisition of Twitch would be the second-largest in its history behind the 2009 acquisition of Zappos. At the time of its announcement in July 2009, Amazon’s acquisition of Zappos was pegged to be about $850 million, though that amount rose as Amazon’s stock price increased. In comparing the acquisition prices at the times of their announcements, Amazon’s acquisition of Twitch at $970 million is slightly larger than its purchase of Zappos.
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