After laying off nearly 400 staff members last year and 500 more this year, Twitch’s CEO has admitted the company is not yet profitable, even more than a decade since its launch in 2011.
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“I know many of you are wondering why this is happening,” said Dan Clancy, CEO at Twitch, in an official blog post addressing the ongoing layoffs. “Over the last year, we’ve been working to build a more sustainable business so that Twitch will be here for the long run and throughout the year, we have cut costs and made many decisions to be more efficient. Unfortunately, despite these efforts, it has become clear that our organization is still meaningfully larger than it needs to be given the size of our business.”
He continues: “So while the Twitch business remains strong, for some time now the organization has been sized based upon where we optimistically expect our business to be in three or more years, not where we’re at today.”
“As with many other companies in the tech space, we are now sizing our organization based upon the current scale of our business and conservative predictions of how we expect to grow in the future.”
Speaking further about the issue in a live stream, Clancy admitted that the company hasn’t turned over a profit yet. “I’ll be blunt: we aren’t profitable at this point. Amazon has been extremely supportive of Twitch. Big thing for being sustainable over time is ensuring we don’t lose money. That’s a big part of my job because that’s going to be what makes sure we can be here for the long term.”
This might come as a shock to many as the streaming service has seen continuous annual revenue growth since at least 2016. According to the data collected by BusinessOfApps, Twitch’s annual revenue grew from USD 275m in 2016 to USD 1.8b by 2020. In 2022, the company made a whopping USD 2.8b and paid over USD 1b to streamers just last year.
However, despite the lack of profits, Clancy confirmed that Amazon is unlikely to drop Twitch any time soon. “The answer is emphatically no. Not at all. Amazon is very bullish on Twitch. They’ve been investing heavily in Twitch.” Amazon acquired Twitch for USD 940m in cash in 2014.
The streaming giant, which had a concurrent viewership of 2.58 million in 2022, might also be feeling pressure from rivals such as Kick, which has signed many popular streamers in huge deals. Last year, Twitch streamer xQC was signed on for a USD 100m multi-year deal to stream exclusively on Kick.
Kick might be enticing streamers away from Twitch due to its competitive revenue split. While Twitch has implemented a 50/50 revenue split, Kick only takes 5% of the streamer’s subscription revenue. Despite its smaller size, Kick CEO Eddie Craven said in a 2023 interview that the company has managed to make a profit in the first quarter of the year through a strategic partnership.
“It’s not a difficult business model to sustain, if you’re doing it correctly,” he said. “I think there is a way to go about this. I think, as long as people understand that there is a long-term roadmap out there, that we are very comfortable with doubling down on. I really look forward to seeing what’s achievable.”
Mufaddal Fakhruddin has been writing about games and technology for the past 15 years. He has lost count as to how many reviews he has written over the years, but he is sure headphone reviews make up at least 70% of that.