YouTube To Acquire Twitch For $1Bn?

YouTube has reached a deal to acquire Twitch, the most popular video game streaming service on the net.

According to Variety, who claim to have “sources familiar with the pact,” YouTube’s parent-company Google is preparing to pay over $1 billion in an all-cash deal that will be announced next week.

UPDATE:

The Wall Street Journal disputes the news, saying the acquisition talks are at an “early stage, and a deal isn’t imminent,” according to their sources. Twitch’s PR rep has also tweeted saying his company “doesn’t comment on rumors.”

This deal continues the trend of consolidation in the online video industry that has seen many high-profile start-ups fold into major corporations.

Twitch’s $1 billion+ valuation also shows the online video industry’s sheer growth in recent years, especially when you consider that YouTube itself was acquired by Google in 2006 for just $1.65 billion.

Twitch allows users to both upload, watch, or livestream content to their service for free. As the popularity of live streaming skyrocketed, Twitch stood firmly at the forefront of the live-streaming revolution for gamers.

Over 45 million unique viewers watched more than 12 billion minutes of video on the service in 2013, and it’s continuing to grow at a phenomenal pace. Along with deals to distribute content from GameSpot, and a deal with CBS Interactive to sell Twitch’s ad inventory, Twitch played a major role in the next-gen console wars after Xbox One announced they will allow users to stream directly to Twitch using an on-console app.

Networking equipment provider Sandvine reported that traffic from Twitch’s servers grew from 0.46% of all North American downstream bandwidth in Fall 2013 to 1.35% in March, 2014. That’s an almost three-fold increase in less than a year, placing it firmly in the top 15 bandwidth users in North America, ahead of HBO Go (1.24%) and approaching online video powerhouses like Hulu (1.74%) and Amazon Video (1.9%). For reference, YouTube represents 13.19% of all downstream bandwidth use in North America.

The advantages of this acquisition would be huge for both companies. YouTube could use the boost in the live-streaming space as it continues to cede ground to services like Twitch, while Twitch would benefit greatly from Google’s extensive infrastructure that could cut costs for the company by orders of magnitude.

However, the deal is not done yet. Google’s legal team is reportedly preparing for the Justice department to challenge the acquisition on antitrust grounds, and the belief that the merger of two services that lead their respective fields would not be in the consumers best interest.

Many Twitch users would agree, with some venting their disappointment at the news on the forums. A key driver behind Twitch’s growth was that it provided a reliable escape from YouTube’s often overbearing ContentID system, which regularly shut-down gaming live streams on YouTube.

Twitch was founded and launched in 2011 by Justin Kan and Emmett Shear. The pair spun Twitch off from their previous service, Y Combinator-backed Justin.tv, which was one of the first websites to allow open user live streaming. The company has raised over $30 million across two funding rounds. If the deal goes through, it will be the largest Y Combinator-backed company acquisition to date.