Why Google Lost Twitch to Amazon

Back in May, it looked like the video game streaming website Twitch was going to be Google/YouTube's next big acquisition for a cool billion dollars, but even after it announced as a done deal in July, the confirmation and triumphant press conference never came.

When Twitch announced that it was being acquired this Monday, the suitor had changed, as had the price: Amazon would pay $970 million and Twitch would revert from YouTube's shiny new toy back to its rival. What the frak happened?

To wonder why there's a $30 million disparity between the two prices is just speculation on speculation—no one knows how much Google was actually going to pay—but an argument can easily be made that Twitch is more valuable for YouTube than it is for Amazon. With around 50 million monthly visitors, Twitch owned the streaming-video-of-video-games space, just as Youtube monopolizes recorded video.

While YouTube was working on improving its livestreaming before the Twitch rumors started circulating, it now has an uphill battle against a well-established service that's basically shorthand for livestreaming gaming, and has to win over gamers it irked by serving a series of copyright notices to both amateur and popular video game streamers last year.

At any rate, the purchasing price wasn't the deal breaker—the pre-nup was. As Ryan Mac at Forbes explained yesterday :

Google was unable to close the deal, said sources familiar with the talks, because it was concerned about potential antitrust issues that could have come with the acquisition. The Mountain View, Calif. company already owns YouTube, the world's most-visited content streaming site, which competes with Twitch to broadcast and stream live or on-demand video game sessions. One source noted that because of the concerns, Google and Twitch could not come to an agreement on the size of a potential breakup fee in case the deal did not go through.

Break-up fees, paid to the would-be acquired company by the would-be acquirer, are a fairly standard feature of company acquisition. As CNET notes, "when AT&T decided against acquiring T-Mobile in 2012, for example, it was forced to pay T-Mobile $2 billion for the breakup."

Google may be somewhat chastened after facing antitrust lawsuits in both Europe and the United States this year, and being informed that "it can be safely predicted that Google's compliance with EU competition law will be closely monitored for a long while," in a letter by Joaquín Almunia, the EU's competition commissioner and antitrust enforcer.

It'd be understandable for Google to just opt for the right conferred by the EU in May, say, "Forget it," even if it that means the future is more complicated for YouTube.

As for Amazon, it's now positioned to do what it did to books to the equally important cultural medium of fish playing Pokémon.