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Twitch’s Layoffs and the Contraction of the Gaming Industry

Twitch’s live game streaming on a smartphone

The pandemic, despite all its negatives, definitely launched some businesses to the top. Lifestyles had to suddenly adjust to new and thankfully temporary norms, and these new lifestyles adopted new behaviors that provided some companies with major advantages. This is precisely what happened to the gaming industry as a whole… and to Twitch specifically. At-home video game streaming hit the mainstream, and everything looked pretty rosy for Twitch. But as everyone gradually embraced a post-pandemic world, the company failed to make the transition. Twitch’s live game streaming has lost momentum since that time. As a result, it’s uncertain what the future holds for Twitch and online game streaming overall. One thing is clear however…the good ol’ days appear to have passed.

Twitch’s live game streaming by some gamer
Twitch’s live game streaming shaped an industry, but now that industry is contracting.

(Take a stroll down Memory Lane and see which businesses thrived during the pandemic in this Bold story.)

Recently, Twitch announced that it would be laying off more than 500 of its current employees. Twitch’s layoffs account for a third of its current workforce. After shuffling through CEOs and moving away from some gaming markets, Twitch appears to be at a crossroads. The company hopes to become profitable by cutting its expenses and focusing on its core offerings. That, of course, would be Twitch’s live game streaming. However, this alone might not be enough, especially when the gaming industry is less robust and other competitors are excelling. It would seem that decisions made in the coming months could be crucial for Twitch. And finding a consistent identity that matches market demand will lie at the heart of its future success.

Twitch’s Rise and Fall

Twitch’s history dates all the back to 2007, when it launched as Justin.TV. While the company started streaming a variety of content, it was evident within a short time that online video game streaming was its hottest product, so in 2014, the company went all-in. The platform shifted to promote Twitch’s live game streaming, and seemingly, consumers embraced the change. Not only did this increase Twitch’s popularity, but it also attracted the attention of Big Tech. Specifically, Amazon recognized the company’s potential and purchased it that same year for just under $1 billion. This along with the company’s ability to attract top creative talent put Twitch on the map. No one would have foreseen Twitch’s layoffs that would occur a decade later.

In 2020, the pandemic gave Twitch’s live game streaming an added boost. In fact, online video game spectating increased by 45% between 2020 and 2021 alone. Not only were gamers tuning in to Twitch’s live game streaming, but so were celebrities. Twitch’s creative talent was making cameo appearances on mainstream media. Consumer engagement was at record highs. As the pandemic waned, so did Twitch’s live game streaming audience. Since 2021, the company has gone through several CEOs, and it continues to seek profitable status. Failing to adapt to changing consumer preferences, the company lost its way. Twitch’s layoffs are an attempt to reduce expenses to accommodate lost consumer engagement. But in the end, this isn’t likely to be enough.

someone using Twitch on their phone
The days of live-streaming games isn’t over, but there’s less and less daylight.

Core Issues Underlying Twitch’s Layoffs

In looking back to issues that led to Twitch’s layoffs, several can be identified. Perhaps one of the most notable involved the company’s subservience to its new owner, Amazon. Inherently, there appeared to be some differences in policy perspectives. Amazon highly values possession of its content and invests significantly in non-competes. However, this is counterproductive when it comes to the gaming industry. Player interaction as well as the sharing of creative content lies at the heart of the gaming sector. Likewise, the gaming industry followed the video streaming industry wanting more enhanced video/gaming-on-demand. However, Twitch’s live game streaming and other offerings failed to expand in this direction. Not only did this encourage viewers and users to go elsewhere. But it also resulted in some of Twitch’s top creative talent jumping ship.

The other challenge that Twitch has faced is one of identity. During the pandemic years of Twitch’s live game streaming, the company had committed to being a gaming company. However, after this, others in the gaming industry shifting to broader mainstream entertainment options. This appeared to be what consumers wanted rather than simply a dedicated video game streaming service. But efforts here by Twitch were lacking and insufficient. Key revisions to its content development and sharing platform weren’t made. And as a result, user experience was diminished. Declining customer engagement led Twitch to again decide (along with parent Amazon) to embrace a gaming identity only. Thus, choosing to evolve into a broader entertainment platform also played a role in Twitch’s layoffs currently.

What Lies Ahead for Twitch and Gaming?

Twitch’s layoffs will impact their sign
Twitch’s layoffs point to an ugly truth: all good things (in business) must come to an end.

The current announcement concerning Twitch’s layoffs are certainly concerning. But this isn’t the only red flag that suggests the company has lost its way. This past year, Twitch also announced it would be pulling out of the South Korea market completely. The company’s CEO attributed the move to extremely high Internet provider network fees compared to other markets. But choosing to leave the most engaged gamer market globally is a tell-take sign that things aren’t going well. Once again, Twitch says it’s going to focus on its core services, which means Twitch’s live game streaming. But this may not be what customers in 2024 may want.

In examining Twitch’s layoffs and strategic decisions further, it’s worth looking at the competition. Indeed, the gaming industry as a whole has contracted since the pandemic, but this is to be expected. We are no longer slaves to our homes, and therefore, captive audiences for Twitch’s live game streaming and other online games are reduced. This is why other companies like YouTube, TikTok, and Netflix who also offer online gaming has invested more broadly. YouTube specifically looks to have taken the lead now when it comes to online and live gaming. Not only is its platform provide a better user experience. But it also makes it easier for gamers and game creators to get recognition and interact.

The bottom line is that the gaming industry is evolving, and  companies need to evolve along with it. Twitch’s layoffs and other actions indicate that it’s focusing on contraction to reduce costs. But when all is said and done, this approach may be viewed as the beginning of Twitch’s end. The gaming industry may not be as strong as it was, but these same customers still have entertainment needs. Identifying these needs and satisfying them are essential if Twitch hopes to once again rise to the top.

 

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