Amazon Buys Video Game-Streaming Service 'Twitch' for $970M

About 1.35 percent of all Internet traffic is devoted to people watching other people play video games.
4:41 | 08/26/14

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Transcript for Amazon Buys Video Game-Streaming Service 'Twitch' for $970M
Okay. We have made -- to Tuesday August 26 the New York financial markets are open in today's big number 970. Million dollars. That's Amazon just paid by -- interactive and online video game streaming service. -- bad deal for -- the company was founded just three years ago hello everyone I'm Michelle Franzen in New York. Fresh from an all night Xbox gaming marathon Jeff MacKey. And Yahoo! finance joins us to talk about this deal -- good morning Jeff. Good morning good morning I want to be clear I can actually play the games myself I just watched other people -- his watch. I guess that's a big deal about this deal is something of a surprise not long ago Google seem to be lining up to -- -- so what happened why the switch. Well I think -- like natural. Fit right Donna YouTube Google it twitch watching -- -- games I think that's where all these people were watching folks play games before. Yet Amazon stepped in -- one of the -- that one of the audience as it turns out and I don't want to distance myself from this because of course I'm young and hip and watch -- play games myself. But a stunning one point 35% of all Internet traffic is devoted to nothing but watching people play video games other people playing video games. I kinda don't get it but it's a huge audience Amazon couldn't ignore at the at a billion dollars -- rounds and -- -- -- torch premier. And you know for all of us who may not -- as -- as humans who are over the age of seventy and get some more of an idea about twitch when -- It is literally bet -- there's not much tonight and -- there's not as you watch republic -- and sell up I don't know -- -- I'd. Just stream myself -- Angry Birds with complete commentary and a solid for half a billion there's an outstanding deal but. I guess there's a social aspect to what you can tied in Amazon's got their own gaming system from the Amazon fire that they're trying to get started. And so there's kind of this weird sad social component to it -- there's also the idea they can get through the games easier if you watch other people do it. And it's just kind of -- thing right now Internet audience eyeballs are hard to get. It's actually a decent price for Amazon relative to their Amazon video offerings. Which have -- audience of comparable size and and they've devoted much more money to it than they have -- this twitch -- so this is religious kind of and in this environment it's not a huge price to pay in real terms -- billion dollar seems like a lot for this concept but in a lot. We don't live in normal time and so -- just acquiring content. I get it it's just slightly less passive and just watching TV but where does this acquisition take Amazon -- -- twitch. Worth nearly a million dollars to the online marketer. Well Amazon has -- strategy just acquiring anything they -- -- here's the idea of Amazon. And I'm an investor so so full disclosure on this. But what you're buying an Amazon is not the idea that they could suddenly become -- Wal-Mart in terms of margins and drive it down about 5% earnings growth. Because the valuation makes no sense on that basis your betting on the future and Japanese -- -- and the operating guys over at Amazon ability to see and that future and continue to expand. The company is growing its top line had some 20%. This far into the game after a couple decades of naysayers and doubters -- still is growing they're becoming Norris a past target last year in terms of size of revenues. So you know what you give them a pass it it's not worth a billion to everyone but for Amazon -- they've got the cash to make this acquisition. It makes sense for them strategically sort of and it's kind of a hot area of growth that they need to be part of and so it it's just one of those deals that sort of makes -- Only in light of these synergies if you are gonna pour money together come up with a billion box are probably -- by -- for the two of us. But you know what and corporate world it's not quite the same thing but could -- also morphed into something else could it rivals somehow YouTube on some level. Possibly I -- it's anything -- Riley never really know what's gonna take off again. And it's this is a system where you watch other people play video games ours not to question a stop Michelle and then we're talking on a -- -- black and. Hey you know why did -- it could rival YouTube and some sense but it. You know and it why would this be better than say the go pro videos have -- surfing and all that business I don't know you know I mean I think -- this is more practical application it's certainly better than. In today's national dog day out need to see more find videos of people's dogs today at -- an -- I was I'd rather watch will play Madden. -- comes out today -- new game may watch -- came on you know let's go watch some twitch. -- -- Jeff MacKey from Yahoo! finance thanks for joining us in the -- gaming now. You of course can keep up with the latest headlines right here on Even watching the big number I'm Michelle Franzen -- New York.

This transcript has been automatically generated and may not be 100% accurate.

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