Exclusive: The War Against Twitch

Story of the Week: The first 6 months of 2016 has seen an insane amount of attention and investment within eSports. If you want to trace the path of this viral growth start with Patient Zero: Amazon’s $970M acquisition of Twitch almost 2 years ago. Twitch could go down as one of the best $1B acquisitions ever and fits perfectly with Amazon’s video content strategy, AWS, and retail — which they haven’t even touched. Imagine if they added a Buy Button on every piece of content?

While others tried similar paths, the negative ROI for MLG and the rumblings I’ve heard about Azubu even with their massive funding, shows the challenges in the space:

The difference is that the newer breed of companies are aiming at various parts of the streaming infrastructure that Twitch has long dominated vs. attacking Twitch head on as those above. I was going to focus primarily on the infrastructure specialists but something happened last week.

Facebook: The 8,000 Ton Gorilla

Last Monday, I’m lost in Excel but get a text with simply “Bulging Eyes Emoji” and a link. I click it and then pick my jaw up off the floor: Facebook and Blizzard announce a partnership for integration. I started writing this before the Facebook announcement and was focused on the entrants Ill address shortly. Let me be crystal clear about this:

“Facebook is the single biggest threat to Twitch. Ever.”

My surprise was for a few reasons. I mentioned Facebook’s potential entrance to eSports almost 2 months ago in eSports Weekly #3. Call me right or lucky but this move makes so much sense that I’ll outline again:

Facebook Live + Mobile + 1 Click Streaming + Monetization (Ads/Donations/Subs/Affiliate/Influencer) + Oculus = A very powerful platform.

I think most media missed another major point as I mentioned on SiriusXM’s eSports show last week:

“Facebook Login will be the single most effective thing to combat online trolling”

You’re no longer anonymous but tied to your FB profile. Some online gaming environments are hostile and to be honest, downright racist. Not only will it benefit players but provide a level of comfort for parents.

I’ll admit my bias that I’m obsessed with Facebook’s growth trajectory, massive global user base and their 10 year roadmap (Twitter launched a decade ago and I still can’t edit a Tweet). Having worked at a company “almost at nuclear war” with Facebook, I know how that battle would have turned out. But I also think people are underestimating the potential for FB Live overall. We are just in the earliest stages for this. If Facebook’s 300B+ market cap doesn’t scare you, read how Facebook destroyed Google+ (What tab do you have open right now — Facebook or Google+?) Now stare into those eyes up there.

Grab some popcorn, this is going to be fun to watch. Apologies for Zuck’s interruption and now back to the streaming infrastructure .

MOBILE

If you’re still using the term “second screen”, say hello to 2013 for me. Mobile is the platform for consumption now. Period. Mobile has been the biggest revolution of Media engagement since the Internet with VR potentially being next. Facebook made 80% of Q4 ’15 revenue from Mobile. From an eSports lens, last year 35% of Twitch viewers were on Mobile and should easily be half by next year. Mobile will be crucial to continue driving eSports growth.

Mobcrush

Total Funding: $16M

TL/DR: Twitch For Mobile

My Take: Over 2 years ago, Twitch released their Mobile Streaming SDK and Gameloft’s Asphalt 8 was the first to integrate. However as that required each gaming developer to integrate the SDK, scalability becomes an issue and not much has been heard since. Mobcrush is aiming to be the Twitch for Mobile by focusing exclusively on this platform.

I only tested Mobcrush on iOS which unfortunately requires a Mac client/phone to be connected. Past that it’s smooth sailing and the interface is slick. They recently launched similar functionality for Windows. On Android this is all done natively and hopefully iOS is not far off. Regarding my favorite question of monetization, I haven’t seen ads on mobile or desktop. A year ago Mobcrush mentioned “microtransaction tipping” which seemed amazing but with the work needed to integrate directly into a developer’s transaction system, a potential reason why it hasn’t launched yet.

With the native Android integration Mobcrush has a lead in the space. Based on the pivot for the next company, I’d be interested to hear more on user growth (not downloads), engagement and monetization.

Kamcord

Total Funding: $35M

TL/DR: Broadcast Your Phone Screen

My Take: I covered Kamcord when they last raised about a month back and my questions remain the same: Pivoting from mobile gaming streaming what does this say about that market, how defensible is this on the OS level and do I really want to watch someone use Tinder? DENA launched their Mirrativ Phone Screen broadcasting app in Japan last year.

Bluestacks

Total Funding: $30M

TL/DR: Broadcast Your Android Games

My Take: I looked into Bluestacks over a year ago and the product initially let you play Android games on PC. That’s a market need? Maybe for WhatsApp but they released their own web version. I didn’t think so either but recently they’ve added the ability to live stream and watch Android games via a Twitch integration. Bluestacks is different from Mobcrush and Kamcord in that you’re playing a Mobile Game → On a PC → Streaming to Twitch. Got it?

I wasn’t able to try Bluestacks as I don’t have a PC and Android device but why tether a user to a PC to stream a Mobile game? Yes this makes it easier for the big streamers who already use PC’s but misses the masses. Bluestacks other proposition is a SDK-less integration and not building a separate platform but rather integrating with Twitch. Surprisingly they do have some monetization with ad-supported downloads and a premium subscription in India — but ARPU on subscriptions there are low and I go back to the need for a PC and Internet connection. Will be interesting to see if they can make game discovery work.

VIRTUAL REALITY

Unless you’ve actually played with VR/MR/AR, it’s challenging to understand the scope. Once you do, the possibilities are mind blowing. Got 10 seconds? Watch this video. I’ve seen it a million times and it still blows me away. William Gibson wrote about virtual reality 20 years ago and some of you readers may not have even have been born when Lawnmower Man came out in 1992. Hopefully we’re at the early stages of true VR adoption.

VREAL

Total Funding: $3.3M

TL/DR: Twitch for VR

My Take: I believe that if VR tech only hits 20% of the potential it will still be revolutionary. Current live streaming is very passive compared to VR where a viewer can literally join the player in a game.

While VR is the future, the future isn’t now. With $800 for a device, a high end PC to run it, and the physical room required; the user scale this year will be small. VREAL is also focusing on VR vs. AR/MR like Magic Leap or Microsoft’s HoloLens and that’s another bet on consumer adoption. VREAL is currently the only player but you’ll see a lot more activity in this space.

GAME HIGHLIGHTS

Just like traditional sports, eSports events or streams can last hours or sometimes a day. In the bite size consumption that younger audiences prefer like Snapchat and Instagram, a few companies are bringing that to eSports.

Forge

Total Funding: $9M

TL/DR: Game Highlights Capture

My Take: You can see the idea for Forge in CEO Jared Kim’s first gaming startup Wegame, which was a social platform for gamers. The technology wasn’t there years ago (remember how horrible Fraps was?) but seamless game capture on PC is a lot easier. Forge not only provides game capture by recording the last 60 seconds of gameplay but also the ability to “bookmark” a point in your game for review later.

I may need to start using the line “I’m not a VC but I play one on TV”. It’s my eternal question for most products and startups: How do you plan to make money? Forge currently has no ads, a free product and no current plan for monetization.

Plays.tv

Total Funding: $44M (Total for parent company Raptr)

TL/DR: Game Highlights Capture

My Take: This shouldn’t come as a surprise that Plays.tv was formed out of Raptr, which was founded by serial gaming entrepreneur and “first official professional gamer” Dennis Fong.

While Plays.tv provides a similar game highlight capture software as Forge; with a year head start Plays.tv now has 10M monthly active users, 4M creators adding 1B+ minutes of video monthly. Not surprisingly, Plays.tv is also not monetizing and offers a free product but is considering ads. The one differentiator I was able to find was that the Plays.tv Platform allows developers to insert native support.

Vibby Allows you to clip YouTube or Twitch streams via web interface. The UX is really easy. Oddshot.tv provides a similar service via browser plugin but has run into complaints of using streamer content without revenue sharing, if there was any. Livecap is another service with a browser plugin but also includes a Mobile app for viewing.

I’ve grouped all 3 companies together as there’s little info on funding or monetization. My biggest question overall: Twitch launched their own clipping service last month. Where you go from there?

CHINA

There are so many stats about China that I love. Here’s one of my favorites — number of cities with over 1M population:

United States: 10

China: 160

Couple the massive population, conveniently located in 100+ urban areas, a growing youth demographic infused with gaming culture and you have a massive eSports opportunity. Here’s some more mind boggling stats — Alibaba (which ships 12M packages a day vs. Amazon’s 4M) AliSports division will invest $5.5M into a tournament prize pool as well as holding a staggering 1,200 events this year alone.

Even with the massive audience, eSports is a losing business in China currently as the sponsorship revenue is not as big as the West — and there’s also no Facebook option. If I’m an Operator there, that’s a small price to pay for the future ROI. Here are a few players and excuse any potential errors — my Mandarin is limited to Ni Hao.

The current Streaming sites:

Others include: Huomao, Longzhu, Quanmin, Chushou, Zhangqi, Huya, and Neotv.

Kek.tv

Total Funding: $2.5M

TL/DR: Stream Aggregation

My Take: Kek.tv is probably the closest thing to a “Swiss Army Knife for eSports” that I’ve seen. Kek.tv’s mobile app provides Live and VOD eSports viewing through almost every platform mentioned above coupled with curation, news, statistics and schedules.

Well that’s what’s promised anyways. Maybe it was because I was using it in the US but the app didn’t have nearly the features enabled per the website. My biggest question is how Kek.tv plans to make money as their primary content are other platforms streams.

MONETIZATION

Currently there are 4 primary ways for a streamer to make money: 1) Video Advertising 2) Sponsorship 3) Subscriptions 4) Donations. The engagement challenge is several: Ads and sponsorships are primarily controlled through the streaming platform; Twitch takes 50% of subscription revenue and donations tend to be less money generating for the average streamer. TwitchAlerts also has the market share on Twitch donations.

Revlo

Total Funding: $1.1M

TL/DR: Streamer Fan Engagement

My Take: Revlo provides a direct connection by giving streamers virtual currency to fans who then can spend it on exclusive content, making a wager or a number of possibilities. What’s really interesting to me is the advertising angle — use Revlo coins to enter a contest to win a fan screening for Warcraft, real life rewards and much more. The other angle? Charging for virtual currency. I don’t think Revlo will implement this anytime soon but I’ve seen first hand the potential revenue when done correctly.

STREAMER TOOLS

Although I’ve covered ~20 companies and written 2,000 words we’re done right? Not even close. The other big category are streamer tools. As each of these companies provides a unique angle, to make sure you don’t pass out from data, I’m going to list them for now and revisit at a later date:

Infiniscene : Funding: $2.7M. Cloud based streaming production.

: Funding: $2.7M. Cloud based streaming production. Beam : Funding: $420K. Interact with Streamer’s gameplay

: Funding: $420K. Interact with Streamer’s gameplay Hubtag : Funding: Unknown. OBS Plugin, streaming production and consulting

: Funding: Unknown. OBS Plugin, streaming production and consulting Stage Ten : Funding: Seed. Cloud based broadcast studio

: Funding: Seed. Cloud based broadcast studio Genvid : Funding: Unknown. Unique camera angles for eSports broadcasting

: Funding: Unknown. Unique camera angles for eSports broadcasting Xsplit: Funding: Unknown. Stream customization and broadcasting

YOUTUBE GAMING

Last but not least YouTube Gaming. I started by saying that Twitch could go down as one of the best $1B acquisitions — I think Google’s purchase of YouTube is the best. There’s a reason why I saved this for last:

“I don’t think that YouTube Gaming needs eSports for now”

Although YouTube doesn’t release revenues publicly it’s been estimated that it generated $9B in 2016 and double the value of Netflix at $100B — almost all VOD. My childhood TV was afternoons and Saturday mornings. For my son it’s Stampy on YouTube anytime, anywhere. That’s a massive shift in media consumption in one generation.

As broad as eSports is now being considered, when analyzed it’s still not the majority of content consumed. Everyone focused on the 800M eSports hours watched on Twitch stat and missed this one:

That’ right. ~75% of hours viewed on Twitch are NOT eSports. While that shows great upside, it reinforces my point on the near term for YouTube. Although Twitch and YouTube both offer Live Streaming and VOD services here’s another way to look it:

YouTube Launching Live Streaming > Twitch Launching VOD

This is a very smart company with massive financial and engineering resources and an already established Gaming platform and community. It will be interesting to see where and if they head in eSports this year.

To close imagine this for a moment: What if Google actually ended up buying Twitch?

[For my VC readers Ill be making an eSports Market Map per segment with an overall ecosystem Map for end of 2016]