Amazon Said to Buy Twitch for $1 Billion as Google Bid Fails

Aug 25, 2014 3:09 pm ET

(Updates with banker in eighth paragraph.)

Aug. 25 (Bloomberg) -- Amazon.com Inc. is buying video service Twitch Interactive Inc. for more than $1 billion in its biggest acquisition ever, adding an online gathering place for video gamers, people with knowledge of the plans said.

Amazon moved in to buy Twitch after the startup’s deal with Google Inc. fell through, said the people, who asked not to be be identified because the talks are private. An announcement for an acquisition for about $1.1 billion could be made as soon today, one person said.

The deal, the largest in Amazon’s 20-year history, gives it an online forum of 45 million monthly active users, where people discuss games or watch other gamers as they play. Amazon Chief Executive Officer Jeff Bezos has made video games a focus of a strategy to add more entertainment services. Just as the company is beefing up its TV programming available to Amazon Prime members, the company operates a game studio in Seattle and has been luring software developers to build more video-game titles for its Fire TV set-top box, Fire Phone and Kindle Fire tablets.

The deal also highlights the stepped up rivalry between Amazon and Google. In addition to battling for customers watching an increasing amount of video through the Internet, the two companies also are competing for business in online data storage and Internet advertising.

The deal was first reported by technology-news website The Information. Craig Berman, a spokesman for Seattle-based Amazon, didn’t return a call seeking comment. A representative for San Francisco-based Twitch didn’t respond to a request for comment.

Bidding War

Google and Twitch were in talks earlier this year on a transaction that could value Twitch at about $1 billion, a person familiar with discussions said in May. As the deal with Google was being discussed, investment banker Frank Quattrone introduced Twitch to other potential bidders, one of the people said. Sally Palmer, a spokeswoman at Quattrone’s Qatalyst Partners LLC, didn’t immediately return a call for comment.

Buying Twitch for $1.1 billion would be larger than Amazon’s acquisitions of Zappos.com Inc. in 2009, Kiva Systems Inc. in 2012 and Diapers.com in 2010. Amazon paid $817.3 million in stock for Zappos. Amazon hasn’t been a prolific deal maker like Google or other large technology companies, buying just 18 companies since 2012, according to data compiled by Bloomberg.

As people move more of their entertainment habits online and away from traditional television, interest has grown in online video companies with large user bases. Walt Disney Co. recently agreed to purchase Maker Studios for as much as $950 million, setting set off a rush among well-capitalized companies to invest in or acquire video companies that have a large viewer base.

Twitch is available on Sony Corp.’s PlayStation 4 and Microsoft Corp.’s Xbox One game consoles. Started about seven years ago as Justin.tv, the service has a highly engaged audience of people who watch others play video games. In February, 1 million people shared videos via Twitch. The company raised $20 million from investors last year.

--With assistance from Brian Womack in San Francisco.