Did anyone expect them to be profitable?
this post was submitted on 12 Jan 2024
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Yeah just keep laying off staff until they are, amirite?
Statements like this are always saved for when a corp justifies layoffs. The reality is that the American tax code is made to encourage corps to spend all the money you make (in which case corps don't pay tax at all). VCs and big tech leverage their positions to massively increase power whether the individual company has savings or not
I mean, yea? Income less operating expenses is profit, so if you can lower operating costs, without compromising the service, your bar to profitability is by definition lower. This is why it is called “right sizing”.
Fta:
"I want to be clear that we still have more than enough resources," said Clancy. "We are still a reasonably sized organisation. We're still going to be able to service your needs. We're still going to be able to improve the product.
My understanding is they tried to break into Korea and absolutely failed when local telecoms jacked up rates to "discourage" competition, and Korea is just corrupt enough to let it slide. I'm guessing there were ideas for other expansion opportunities as well, but with gaming being less popular after COVID lockdowns and investment money drying up, they need to shut down those riskier growth opportunities.
Last year's layoffs were largely around the Korea expansion, and this year is probably similar. I'm guessing they were working on some projects and didn't see the return they were hoping for, hence the pullback.
To me the funniest part is his praise for Amazon for being strong supporters.
So, ok, heres what that means:
Twitch will basically fold and crumble and be cannibalized and/or spun off it it cannot hit the growth rates it needs to hit in order for higher ups at Amazon to view it as a worthwhile money sink now that could actually contribute net positive to the company in the long run.
But, if Twitch cannot grow fast enough, they will basically pull the plug as it will be too much money lost that could better be used elsewhere.
And the inherent problem with Twitch is that its fucking madness, generates some new insane bad PR fairly reliably with some outrageous thing some streamer does, or doesnt do, or maybe did... or via generating the terms of service version of 'a huge amount of people didnt like that' that is impossible to not have happen for nearly any significant TOS change because again Twitch is full of crazy idiots who do not care about anything other than their really weird niche or their favorite streamer, because basicslly the whole point of twitch is to go there and have an unhealthy parasocial relationship with someone, at least thats the kind of interaction that generates revenue.
But that is also what generates all the insane PR nightmares that are preventing Twitch from growing fast enough.
Its essentially an unwinnable situation of paradoxes that will nearly certainly lead to business decisions that functionally either milk more money out of the current user base in one way or another, possibly combined with something like an adpocalypse.
This makes it more profitable in the short run, but lowers long term growth prospects.
The entire economy is currently under a lot of stress, and Amazon's two core businesses of shipping stuff everywhere and providing basically servers for businesses are very likely to feel effects of a general economic downturn more rapidly than many other kinds of businesses.
Twitch isnt core, its not even profitable, its a PR nightmare.
What would you do if you were an Amazonian Higher Up and you wanted to preserve Amazon's general profitability?
How many people will really cancel their Amazon Prime if that involves a curtailed aspect of Twitch benefits, or none at all?
I never wouldn't bought Twitch in the first place. Video streaming is expensive with relatively low margins, especially if the majority of your users are ad supported. You're not likely to convert users to higher margin products either, because what other products would they really be interested in? Games? That's a really hard market to break into, even if you already have the delivery network in place because people like to stick with what they've been using.
If I was a higher up, I would negotiate the Amazon Prime deal without direct ownership of the company, and sponsor streamers to rep your products. They already kind of do it for free by mentioning the free subs, it wouldn't be much of a push to get them to mention Amazon more often (maybe so product reviews live for accessories or something). Running the service is a low margin deal and potentially volatile if large streamers move elsewhere (which they have), so it would be better for Amazon to more easily switch who it advertises with than go all in. It may cost them a little more, but there's less risk and the money can be invested in other projects.
Honestly, I would look at selling Twitch to Google or something, who could turn it into a side project of YouTube (and VODs and clips could directly transfer to a YouTube channel). Google isn't in the shopping business, so I'm sure they could work something out.
As a consumer though, I hope Twitch dies and something better takes over. Kick.com ain't it though.
Just rip the bandaid off and go full cam porn section already. That’s clearly what nets them the most engagement. Couldn’t be clearer given the different rules and priorities they give to certain categories like the hot tub bullshit and recently the all but nude content
I guess they should go out of business then. Of course they won't, because these kinds of statements for companies above a certain size are almost always false.
I guarantee there are things besides layoffs that could be done to enhance profitability. What's the C-suite making?
Probably just Amazon sucking out more revenue than they should, but since they own Twitch in full they can do whatever they want.