Here is how livestreaming can pay its way in 2024 – and creators will not like it

Twitch has become the latest company to provide a sobering outlook for the creator economy. On Wednesday (January 11th, 2024)chief executive Dan Clancy confirmed press rumours that Twitch would be cutting more than 500 staff from its workforce. Clancy said the size of the company was based on where they thought it would be in three years, rather than where it was now. Therefore, the livestreaming service was resizing based on the “current scale” and the “conservative predictions” for growth.

There are several reasons why Twitch has reached this point.The first is costs. Running a livestreaming business is expensive. The cost of managing servers and data storage has always been a significant pressure for tech companies and this has only intensified in recent years due to rising inflation. The other financial burden is also its biggest revenue driver: creators. As Clancy said in his statement, Twitch paid more than $1 billion toits live streamers in 2023. This was the year Twitch introduced the Partner Plus programme to combat Kick’s attempts topoach creators with a more favourable 95/5 subscription split, compared to Twitch’s 50/50 offer. Partner Plus offered streamers with 350 recurring paid subscriptions over three consecutive months a 70/30 split on subscription revenue. Factor this in with last year’s sluggish growth in the digital advertising market and it was inevitable that tough decisions would have to be made.

Yet, it does not end there. If Twitch is going to reach sustained profitability it will need improve growth. Twitch’s weekly active usage remained in single digit figures in Q3 2023, while the likes of Snapchat,TikTok, and YouTube sat at around 20%, 40%, and 70% respectively. That may not matter if Twitch was a private company. It is a niche service that caters mainly to gamers and those who enjoy live talk content. However, Twitch is owned by Amazon: a company that will be expecting bang for its buck. There would have had high hopes when it bought Twitch for $970m a decade ago that it would have been closer to achieving mainstream engagement in line with the broader gaming industry.   

So, what does this mean for creators? It is another indication that the era of booming creator pay in livestreaming is over. MIDiA first called this last year when Twitch reached a peace deal with livestreaming rival YouTube that allowed creators to simulcast their livestreams on the Google-owned platform. It meant that live streamers which YouTube had poached from Twitch on big money deals could return. Such a measure makes it harder for rivals such as Kick andYouTube to prise creators away from the platform by watering down the power of exclusivity. With Clancy significantly cutting costs, it looks likely that creator pay has reached a ceiling at Twitch for the time being. This means that creator pay could become a flash point again in 2024, like it was in 2023. This time it is likely to be driven by generative AI content creators, which are poised to explode onto social video platforms. They can make more content a lot faster than human creators. This will make it harder for human creators to not only grow viewers but hold onto their pre-existing audience base.

What Twitch now needs to do is to focus on empoweringcreators to extract more money from their loyal fans. This is a theme that could also emerge for other social video platforms facing stagnant audience growth. Twitch must do more of what it does best: creating innovative monetisation techniques that inspire audiences to spend. Twitch is certainly trying. Guest Star (recently rebranded Stream Together)was launched to allow streamers to bring audiences with a camera and microphone directly into the action. While it has potential, it has yet to deliver on its promise. For creators, this will mean getting comfortable with the uncomfortable: trying to extract greater returns from the fans they already have.

In recent years, Twitch has tried to fire up growth by bringing down the walls that had been put in place to lock-in value. The hope being that streamers posting on rival platforms would drive audiences back to Twitch. Now, Twitch needs to look inward to deliver monetisation drivers that make creators loyal to the platform beyond subscriptions, donations, advertising revenues, and sponsorship deals. Twitch’s power resides primarily in its command over livestreaming culture. Those audiences that value the ecosystem may have start paying more to be a part of it. Meanwhile, with TikTok making a huge e-commerce play through livestream shopping, the obvious question is: why is Amazon not using everything it has learned from its ownership of Twitch to steal the march in Western markets?

Twitch was the livestreaming trailblazer when it was launched as Justin.tv in 2007. Now it needs that foresight more than ever if it is to pay its way in 2024 and beyond.