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Report: YouTube may buy Twitch for $1B

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Amid today's AT&T (NYSE: T)-DirecTV (NASDAQ: DTV) merger excitement, Google (NASDAQ: GOOG)-owned YouTube may soon announce that it has reached a deal to buy video game-centric site Twitch for $1 billion. Neither company would comment on the reported acquisition.

While Variety reported that the deal is already done, The Wall Street Journal differed, saying that a price has not yet been set and that talks are in early stages. In any case, if YouTube is offering the amount reported, it would be the site's biggest acquisition ever.

Twitch has surprised many online video players with its meteoric rise in viewership, particularly considering its primary content. In fact, some attendees at the Streaming Media East show last week were surprised that Twitch's Matthew Szatmary, its senior video encoding engineer, was selected as the first-day keynote speaker--until he ran down the site's numbers.

Via Twitch, viewers watch other users play video games live. Sounds incredibly boring, but the site's audience numbers are growing, with 45 million unique viewers in February, and its bandwidth usage tripled in North America between March 2013 and March 2014, according to a Sandvine report. It currently takes up at least 1.35 percent of all bandwidth in the region--not far behind Amazon (NASDAQ: AMZN) Instant Video, which uses 3 percent. And its live video streaming eclipses that of YouTube Live, according to the WSJ, taking up 44 percent of U.S. live-streaming traffic by volume in early April.

Live video in general is continuing to grow in popularity. The recently launched WWE Network boasted 667 million subscribers within its first six weeks of operation. Major League Baseball has enjoyed a steady growth thanks to a solid online video infrastructure it's been developing since 2002--one that other live event programmers have been able to utilize, including Turner, with its record-breaking online stream of the March Madness tournament.

YouTube is clearly looking to capitalize on the live-streaming market, but also rope in Twitch's popular live user-generated video concept. The live element would likely be a viewer-attracting addition to YouTube's large collection of recorded gameplay videos.

Twitch uses technology utilized by Justin.tv, one of the first online video sites to offer live user-generated streaming video. Justin.tv co-founders Justin Kan and Emmett Shear spun Twitch out of Justin.tv in 2011 to focus on the live gaming segment, raising $35 million in funding over the past three years from investors like Bessemer Venture Partners, Draper Associates and Thrive Capital.

For more:
- Variety has this story
- TechCrunch has this story
- The Wall Street Journal has this story

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