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Why Did Time Warner’s ELeague Partner with Amazon’s Twitch?

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Launch of ELeague and agreement with Twitch

Late last month, Time Warner (TWX) launched ELeague, a channel that broadcasts professional gamers participating in live gaming tournaments. Last month, ELeague also entered into a distribution agreement with Twitch, Amazon’s (AMZN) video gaming streaming platform. According to the agreement, Twitch will stream live ELeague tournaments through the ELeague channel on Twitch and through Twitch’s embeddable player.

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The ELeague channel on Twitch will also have VOD (video-on-demand) content. Time Warner explained the rationale behind the launch of ELeague in the company’s fiscal 1Q16 earnings call, saying, “It is more just really trying to position the Company to be where consumers are. And in looking at secular growth areas and in looking at areas where particularly young people are spending tremendous amounts of time, you obviously have to pay attention to the gaming industry.”

Time Warner also said that it viewed ELeague as an experiment but it was hopeful that ELeague would turn out to be an asset for the company on both television and digital platforms.

The growth of Twitch

At the end of 2014, Twitch had more than 100 million monthly unique users. In 2015, it had 1.7 million unique broadcasters compared to 1.5 million in 2014.

When Amazon acquired Twitch in 2014 for $970 million, Twitch was the fifth-largest video streaming website in the United States after Netflix (NFLX), YouTube, Amazon, and Hulu. Alphabet (GOOG) was also interested in acquiring Twitch.

According to Twitch.tv, the number of monthly unique visitors on its platform rose from 20 million in 2012 to 45 million in 2013 and 100 million in 2014, as you can see in the above graph. This was a CAGR (compound annual growth rate) of more than 50% as gamers bought Microsoft’s (MSFT) Xbox One and Sony’s (SNE) PlayStation 4 with a built-in Twitch app (application).

Amazon makes up 6.5% of the PowerShares QQQ ETF (QQQ). QQQ has 4.4% exposure to the television sector.

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