Introduction:
In a recent blog post, Twitch, the live streaming platform owned by Amazon, confirmed a significant downsizing, resulting in the termination of more than 500 employees. This move comes as the second round of layoffs in less than a year for Twitch, indicating ongoing challenges for a platform that attracts over 35 million daily visitors but struggles to turn a profit.
Details of Workforce Reduction:
CEO Dan Clancy expressed regret in the blog post, acknowledging the painful decision to trim their workforce by over 500 individuals. Despite cost-cutting efforts, Clancy emphasized that the organization remains considerably larger than necessary for the size of their business.
This downsizing marks the second occurrence within a year, with the first round reported by Bloomberg less than a year ago. Notably, Amazon, Twitch’s parent company, also laid off hundreds of employees from Prime Video and MGM Studios on the same day. Amazon had previously announced the introduction of ads on Prime Video at the end of January, aiming to fortify its streaming business.
Upon assuming the role of Twitch CEO in March 2023, Dan Clancy initiated a significant cut of 400 positions. At the time, he defended the decision as necessary for the long-term management of the business for creators. Last month, the company announced the closure of Twitch in Korea on February 27, citing prohibitively high operating costs in the country.
Since Clancy took charge less than a year ago, Twitch has parted ways with over 900 employees. The current workforce is approximately half the size it was a year ago, according to PC Gamer. The affected employees were notified on Wednesday morning, followed by a company-wide meeting to address the rest of the staff.
Challenges Faced by Twitch:
While creators are the backbone of Twitch’s business, the number of active streamers on the platform has plateaued in recent years. According to Twitch Tracker, the count of active streamers surged during the pandemic, reaching a peak in January 2021 with just under 10 million creators. However, this number declined throughout 2021, with now less than 8 million actively streaming in 2023.
Twitch appears to be grappling with challenges in attracting and retaining creators. A report by The Washington Post in 2021 highlighted that many of Twitch’s popular streamers earn less than minimum wage. Despite attempts to entice creators by offering a 70% revenue share to top streamers in June 2023, reports suggested that this would apply to only 2.5% of streamers, with the 70% share dropping to 50% after a streamer earns $100,000.
The monetization struggle stems from Twitch’s difficulty in capitalizing on advertising compared to competitors like YouTube. Clancy’s initial approach as CEO was to reduce ads on the platform, which resonated well with viewers but did not necessarily benefit streamers.
Additionally, Twitch faces challenges in content moderation, with inconsistent policies on nudity. While the platform recently banned suggested nudity to create a safer community, it continues to grapple with defining its audience after a decade of operation.
Conclusion:
Twitch’s recent layoffs underscore the complexities the platform faces in achieving financial viability and adapting to an ever-evolving digital landscape. The streaming giant continues to navigate challenges in monetization, content moderation, and creator engagement, leaving the future of the platform uncertain.