What is Twitch and is it really worth $970m?

It's no longer news that gaming is big business, but it might still come as a shock that a company which lets you watch other people playing video games could be worth just short of a billion dollars.

After months of speculation that Google was ready to snap up the video game streaming platform Twitch, Amazon confirmed yesterday that is was buying the service for $970 million (£585m) in cash.

The Google deal stalled, Forbes says, due to "potential antitrust issues" posed by its ownership of YouTube, leaving Amazon clear to buy the service and add Twitch to its growing media empire.

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What is Twitch?

Gamers use Twitch to broadcast their videogame sessions to online audiences, providing reviews, tutorials, guides and blow-by-blow gaming walk-throughs to viewers around the world.

The service began as a part of an online video broadcaster called Justin.tv – a "life-streaming" site through which users uploaded videos of their everyday lives.

Twitch split off from Justin.tv in 2011 and went on to raise $35m in venture-capital funding from investors including Bessemer, Thrive Capital and gaming company Take-Two Interactive Software.

Part of the company's success is credited to the fact that it works on rival platforms – Twitch comes pre-loaded on both Sony's new PlayStation 4 console and Microsoft's XBox One, meaning it can broadcast games from all players, including titles that are exclusive to one console or another.

How popular is watching other people play games?

Very popular. Since its launch in June 2011, Twitch has grown from two million viewers a month to 45 million a month today, Wired says. Viewers now watch 12 billion minutes of live games a month – figures Wired says "are putting TV ratings to shame".

A survey by broadband service provider Sandvine released earlier this month found that during peak hours Twitch accounted for 1.35 per cent of all US internet traffic – a huge achievement after just three years.

How does Twitch make money?

Twitch makes its money through advertising and subscriptions. The service runs banner ads and also allows users to include advertising throughout their broadcasts.

Broadcasters get a share of advertising profits once the revenue they have generated exceeds $100, the BBC says. Popular users can also opt to offer extra content to viewers who sign up to their stream, normally with a $5 subscription.

Twitch also lets people donate money directly to one another without taking any kind of cut.

In February this year, the service also introduced its "Turbo" subscription costing $8.99, which allows users to watch videos without having to sit through any adverts.