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How does Twitch Make Money?

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From the Experts

Aug 05

3 min read

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3 min read

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Twitch is basically a free online live streaming platform that allows users to share audio-visual content. The platform makes money by running video ads and charging users a monthly/yearly subscription fee.

While Netflix, Amazon Prime, and other giants have their own space in the streaming TV space, Twitch is another undisputed champion in its arena. The Amazon-owned platform for live streamers playing games hosts over 91% of the entire video game streaming. Boasting 9.36 million active streamers and revenue of $103.65 million, Twitch has become one of the popular game streaming platforms on the internet.

Just like Netflix, Twitch reached heights of popularity during the pandemic, becoming the destination for gamers.

That's why visionary entrepreneurs are planning on how to make a live streaming website, and have a high success rate if they follow the right approach. If you are an entrepreneur or a business that wants to build a live streaming site like Twitch, you might be wondering how the platform generates revenue.

Let's discuss all making money by launching a live streaming site like Twitch. 

How does Twitch make money?

Twitch is basically a free online live streaming platform that allows users to share audio-visual content. The primary focus of the streaming platform is live streaming in video gameplay and other categories, including live cooking, music, art, or channels for instant chatting. The platform makes money by running video ads and charging users a Monthly/yearly subscription fee. Portions of revenue are shared with the content creators as well. The basic freemium models help Twitch to bring in new users and retain existing ones rapidly. 

  • Advertising

The average age group of Twitch users is 21 years and naturally has a smaller incomer than their older age groups. Most users might not be able to afford the premium features available on the platform, including subscriptions. Hence, Twitch offers free access to the platform and makes money through integrated advertisements.

Twitch enables video ads on their live broadcasts and on-demand videos to compensate for the lack of monetization it has with free users.

The platform first forms a deal with the advertising brands that are ready to partner. Then content creators place the ads on their Twitch channels, for which they are compensated based on the cost per mile (CPM) performance.

CPM is the money the advertising brand pays a creator for every thousand visitors who view the ads. It comes around anywhere between $2-$10, and the rest of the money goes to Twitch.

The exact amount earned by each streamer from advertisements varies depending on the number of viewership and other factors like the type of ads, its length, keywords, and the industry that the advertising brands operate in, etc. 

  • Subscriptions

Subscriptions are another revenue-generating approach Twitch follows. Twitch Prime is the premium membership program the platform offers to users, bundled with Amazon prime and prime video subscriptions.

Along with that prime users gain access to in-game content, free games, a special badge, free subscriptions to their favorite channels, and more.

To join, a user must have an Amazon prime account or primer video account, which cost $12.99 and $8.99 per month, respectively.

When launching a live streaming platform like Twitch, you can also implement the subscription model where you provide several attractive benefits in a bundle to your users for a steady income flow. 

  • Partner programs

Twitch also makes money from partner programs with popular broadcasters who have a huge follower base on the platform. The basic requirements a streamer needs are great content, average viewership, and a streaming schedule of 3 days every week.

Partners can also make money through merchandise selling, advertisements, and paid subscriptions for their channel. Twitch gets its share of the revenue from every merchandise partners sell. 

  • Cheer Bits

Twitch has its own in-stream currency termed Bits, which viewers use to express their appreciation to their favorite streamers.

Users can send cheer bits to content creators to cheer them on. One cheer bit equals one cent, and the more bits the streamer gets, the more actual money they make.

Cheer bit donation is a system that is based on generosity, and streamers are not allowed to ask directly for it. Instead, they have to earn bits by delivering unique content that makes the audience donate bits.

Audiences can buy Bits using PayPal or Amazon payment. Users can also earn bits by watching an ad on Twitch from which the platform makes money again. 

  • Merchandise

Twitch's parent company is Amazon; it's no surprise that the platform makes money by selling merchandise.

Twitch provides a wide variety of merchandise for the fans on its platform. Its official Amazon store, named "Loot Cave," is where users can buy themed clothing, accessories, and gift cards.

The merchandise is available in all countries where Amazon operates. In addition, Amazon Prime customers in the US can also enjoy the perk of getting free 2-day shipping, which is really cool. 

Is a live streaming platform like Twitch profitable?

From the revenue figures mentioned in the beginning section of this blog, it is clear that Twitch is a commercially successful platform. If you have rich content that caters to the right audience, you can also create a successful live streaming platform like Twitch.

However, to run a successful live streaming business, you must focus on building a full-fledged platform with great UI/UX and unique features.

While creating a live streaming platform like Twitch is a daunting task in terms of both effort and money, there are other affordable options as well. One such approach is to use a self-hosted live video streaming software to build your Twitch-like platform with the same features and functionalities. 

Conclusion

Being owned by Amazon, the current monetization strategies of Twitch are powerful. The streaming platform has multiple revenue streams and is well prepared for its long-term growth.

If you plan to launch a streaming platform like Twitch, you can leverage the monetization approaches mentioned above either alone or as a combination, just like Twitch does. Get your creative hat on and come up with unique money-making ideas like cheer bits that are equally interesting for your audience as well. 

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