Screenshot : Twitch

On Friday afternoon, news leaked that Twitch had cut more than 25 jobs, mostly from Twitch Studios, an in-house production group, and the company’s community and marketing teams. The laid-off employees—some of whom had been with Twitch since its inception—were reportedly told that the company had overhired and needed to resize as part of what a spokesperson called an “aggressive growth strategy” for 2018.


Though the layoffs were spread throughout the company, perpetual Twitter agitator, noted rumor-monger, and esports evangelist Rod “Slasher” Breslau pointed out that many of those affected either were working in or had worked in the world of competitive gaming. This led him and others to wonder if the layoffs marked a change in attitude on behalf of Twitch towards one of the company’s biggest constituencies, esports fans.

“It’s unbelievable to me [that] Twitch would compromise its core audience,” Breslau said, and his mentions are filled with distraught esports fans who feel the same way.




If you’ve been around esports long enough to recognize the names of any of the now former Twitch employees, this all probably provokes a bit of existential angst. The current esports boom began in part because Twitch offered a suite of viewing metrics that made it much easier for esports teams and tournaments to negotiate with sponsors. In turn, the growth of esports normalized the practice of watching videogames. Twitch and esports have been intertwined for nearly a decade, and the vibrant esports landscape we have is unthinkable without their symbiosis. So what reason would Twitch have to turn away from esports, if that really is what’s going on here?

Platforms and publishers are constantly making changes that have very little to do with their readers’ and viewers’ desires. “Contrary to the promise from executives about what audiences really want,” Adam Clair wrote of last year’s upheavals in the publishing industry, “this pivot to video is more about advertisers’ ongoing search for a sustainable ad format, one that doesn’t end up proving its own ineffectiveness or exhausting its novelty.” In other words, looking at real and imagined audiences is a shitty way to understand how a platform behaves. If you really want to understand how and why Twitch has changed over the last decade, start by following the money.

The history of monetization on Twitch, both for itself and the streamers that generate its content, explains where the platform has come from and where it’s going. When the enviable job of full-time streamer first became apparent in the early 2010s, on-air ads were the primary means by which a streamers could monetize their content. Their importance to the early economy of Twitch is laid bare in a frank and detailed forum post by then-COO Kevin Lin from 2012, two years before Amazon bought the platform for a billion dollars.




“We strive for complete transparency with our partners. That’s why we will offer data on both ad opportunities and ad impressions,” Lin writes in summary. “We’re the first to build commercial breaks, the first offer live transcodes, the first to offer channel subscriptions, and the first to offer advanced chat moderation tools, and on and on. We will continue to make TwitchTV not only the best place to find great gaming content, but also the best place for partners to broadcast their content and to earn a living by doing what they love.”

It sounded nice in theory. But the widespread use of ad-blocking plugins meant that banner ads alone weren’t enough to sustain a secure living for all but the most popular streamers and tournament organizers. As a result, many streamers turned to donations as an additional source of income, a practice that was common among the platform by the end of 2012 and grew dramatically in importance during subsequent years. A 2016 blog by Mike Le, CEO of Streamlabs, which makes a popular donation management tool, reveals just how crucial donations became to Twitch’s economy in the span of a few years. As he points out, tipping as a source of income went from $43.6 million in 2015 to $80.2 million in 2016, while the number of channels generating $10,000 or more from donations nearly doubled in that time period.


These shifts in how streamers enriched themselves redefined the relationship streamers had with their audiences, incentivizing them to cultivate an intimate relationship with their fanbase. Emotional labor – the management of audience members’ emotional states, whether by sharing in viewers’ successes or commiserating with their struggles – became part of any successful streamers job description. T.L. Taylor, an MIT sociologist who researches livestreaming and esports, summarizes this shift by writing that “subscription requests framed as ‘do you want to show your appreciation?’ or thankfulness from the streamer when donations are made highlight how the emotional connections between producer and audience are an important part of the economic system on the platform.” Emotions, not ads, now reigned supreme in the churning economy of Twitch.

We’re almost back to esports; stick with me here. The primacy of donations for Twitch streamers was a tremendous boon for anyone who wanted to make a career out of livestreaming, but it didn’t necessarily translate to direct revenue for Twitch because donations were were processed entirely by third-party tools. In response, Twitch introduced its Twitch Bits service in mid-2016, a brute force way for the company to force itself into the flows of the donation economy. Streamers protested, of course, given that Twitch took a 30% share of any donations processed through Twitch Bits, but there wasn’t any way to opt out. Though its Bits program, Twitch now depended in part on the donation economy its streamers had originally pioneered.


In the long arc of Twitch, then, donations and subscriptions have grown in relative importance for Twitch, while the dependency on ads and sponsorships has waned, given that the former is anemic as far as revenue-generation is concerned and Twitch doesn’t necessarily get a cut of the latter (i.e. Twitch isn’t making any direct revenue off of, say, an individual streamer’s Monster Energy sponsorship). But here’s the critical point: this trend isn’t necessarily true for Twitch’s user’s revenue streams, which vary significantly based on what kind of content they create.

These shifts in the economy of Twitch don’t simply alter the relationship between viewers, streamers, and Twitch itself, but also what forms of on-air content align with different monetization schemes. That puts esports in a tough spot, and exemplifies the tension in how Twitch makes money versus how (some of) its users make money. Generally speaking, esports has relied on sponsorships and, now, media rights, rather than donations or subscriptions. That’s a 1-2 punch that doesn’t do much for the platform: Twitch doesn’t benefit directly from sponsorships, and it pays for media rights.


It’s one thing to donate to or subscribe to Twitch Prime for $5 a month for a charismatic streamer like Ninja—he plays a streaming-friendly game like Fortnite and acknowledges every donation and subscription he can. But that’s hard for a tournament to match; ESL can’t cultivate the same sense of intimacy with its viewers that Ninja can. Insofar as donations and paid subscriptions rely on these interpersonal connections, they simply aren’t as effective in the context of esports tournaments, even as they become increasingly important for Twitch’s own revenue stream.


The obvious caveat here is Overwatch League, which has integrated Twitch Bits into a robust viewer-reward system to pretty good effect. But Overwatch League is the enormous exception that proves the rule. Twitch paid an estimated $90 million for the rights to broadcast the OWL, and the company has every incentive to try to figure out how esports and the donation economy they control can work together. In fact, one of three esports-related jobs on Twitch’s hiring board is dedicated to exactly that. The other caveat is that many of the most popular streamers on the platform (Ninja, Shroud, Imaqtpie, etc.) are or were professional gamers. But their in-home streams have far more in common—aesthetically, technically, and financially—with non-competitive variety streamers than the spectacle of the League Championship Series or The International.

It would be a hasty generalization to suggest that Friday’s layoffs at Twitch are a premonition that Twitch is getting out of the esports business. It’s not. As long as Twitch is the dominant and best livestreaming platform and willing to pay for broadcast rights, there will be esports on Twitch.


In that sense, Twitch’s “restructuring” and coming “aggressive expansion” isn’t about esports, or only obliquely so. It’s really, as Taylor noted on Twitter in the wake of the announcement, a sign of the tricky line Twitch walks between being a neutral platform for content creators and a media company that buys and makes its own content. Friday’s news – along with a Twitch spokesperson’s bromide that they’re conducting “team adjustments in some departments … [to prioritize] areas most important for the community” – might be a sign that the former is now leading the company’s strategy. All that is solid melts into air, and Twitch’s near future looks like it will be more streamers and less esports for the simple reason that the ways that streamers make money benefit Twitch a lot more than esports does. But no matter what the next pivot is, what Twitch is and does, and on whose terms it’s reshaping the media ecosystem, is far more complex than what an imagined “core audience” really wants.

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