Twitch Is Starting To Feel Like A Failed State

This week, Twitch has rolled out a proposed set of changes meant to satisfy creators who are tired of putting in dozens, hundreds of thousands of hours streaming, while believing they are underpaid for that work.

The new concept gives streamers the long-awaited 70/30 split of revenue they’ve been wanting, which is the case on some other platforms. But there are some restrictions. You need to have 351 paid subscriptions to get to the 70/30, and then if you hit a $100,000 cap, that goes down to 50/50 again. So the most “efficient” level is around 2400 subs, before larger creators get hit with that cap.

But there’s more, as if you read the fine print, Amazon Prime and gifted subs do not count toward those 351 subs you need to qualify for the 70/30 split. But gifted subs, where someone in your community is paying for subs for others, do count toward the overall cap. That doesn’t seem fair to most. It also creates an awkward situation where streamers may have to ask their audiences to buy a “real” sub and not use an Amazon Prime or gifted sub so they can hit that target. Very uncomfortable.

This is just another stage in the eternal push and pull between Twitch and creators, which Twitch makes bad decisions or at best, good decisions with big caveats. But it’s created the following situation:

Twitch is not and has never been profitable, not even since the Justin.tv days. Its costs are too high so what it does pay creators already is too much their eyes. A rival like YouTube is able to support its livestream ambitions with its very profitable video arm, something Twitch does not have in any meaningful capacity and has not been able to ever effectively craft. Most other livestream rivals have failed out of the business like Microsoft’s Mixer. A new upstart like Kick is offering great terms to creators, but it’s easy to imagine that after these initial offerings it will begin to understand the costs of running a platform like this. Those deals will likely not stay as rosy as they are now.

On the creator side, leaked earnings reports from Twitch have revealed that only .01% of streamers make even the equivalent of minimum wage on the platform. Sure, you’ve heard of the big, superstar millionaires, but they are an impossibly tiny fraction of the market, and even many of them have left Twitch for greener pastures at YouTube because of their policies.

A significant way Twitch could make more money and therefore get on a path to profitability would be to have more ads on the site. That’s how YouTube makes its billions, after all. But Twitch streamers are enormously skeptical of increased ad demands on their streams, given what it does to their live audience. It’s not like YouTube, where you get an ad at the start you can skip, or one or two in the middle of a recorded video. Twitch is a live platform so if ads suddenly show up in the middle of your stream where you’re forced to stop whatever you’re doing, this annoys viewers and many of them may leave. Twitch, in another brilliant decision, rolled out policies that limit how sponsorships can be shown on stream, ways creators can make money without Twitch ads, but that was such a bad call that they had to quickly walk it back.

There are almost no winners here. Twitch is an unprofitable business constantly tasked with actually making money by the hugely profitable Amazon. Twitch streamers are dramatically underpaid for the hours they put in, but even policies meant to help them have significant catches and are not getting them to where they need to be. Demands like more ads make sense on Twitch’s end but drastically hurt livestream engagement when those demands keep increasing. The only people making out somewhat okay are about 7,500 creators making more than minimum wage and maybe a few hundred doing really well.

This problem has been going on for a decade and there seems to be no real resolution in sight. But I would caution those leaping over to Kick that if terms from a livestreaming service seem to good to be true, they probably are, and essentially no one has actually figured out this business model yet.

I’ve asked Twitch for comment on some of these new policy caveats and will update if I hear back.

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