Amazon steps into Internet gaming with acquisition of Twitch

The videogame industry is big business, and Amazon recently stepped into this arena in a major way. Market watchers in California likely saw news of Amazon's recent agreement to pay $970 million in cash for Twitch Interactive Inc., the popular Internet gaming channel. Twitch may not be a familiar name to many Americans, though the channel draws an immense amount of Internet traffic, fourth behind Netflix Inc., Google Inc. and Apple Inc. Twitch is not only a hub for gamers to play each other; viewers also tune in to watch gaming competitions.

In addition to expanding Amazon's sales of gaming products, the acquisition is expected to bolster Amazon's ad sales. Young male gamers provide most of Twitch's Internet traffic, and this demographic is also highly targeted by advertisers. According to one analytics firm, the prices for running ads on Twitch are, on average, about 85 percent higher than the prices paid by advertisers on other video sites.

In terms of operations after the acquisition, Twitch will be an independent subsidiary with an office in San Francisco. The company has about 170 employees, all of whom are expected to shift to Amazon.

Since 2011 when the company was founded, investors put $35 million into Twitch.

While relatively few acquisitions carry a price tag of nearly $1 billion, business transactions of all sizes require careful planning to protect profits and guard against liability. Shareholder and operating agreements must be meticulously drafted; businesses have to be accurately valuated; and employment contracts should be free of ambiguities. Regardless of the size of the transaction, a misstep in any of these areas could lead to costly legal disputes.

To protect your interests in a business sale or acquisition, it is extremely important to have a full-service law firm on your side.

Source: The Wall Street Journal, "Amazon to Buy Video Service Twitch for $970 million," Douglas Macmillan and Greg Bensinger, Aug. 26, 2014

In terms of operations after the acquisition, Twitch will be an independent subsidiary with an office in San Francisco. The company has about 170 employees, all of whom are expected to shift to Amazon.

Since 2011 when the company was founded, investors put $35 million into Twitch.

While relatively few acquisitions carry a price tag of nearly $1 billion, business transactions of all sizes require careful planning to protect profits and guard against liability. Shareholder and operating agreements must be meticulously drafted; businesses have to be accurately valuated; and employment contracts should be free of ambiguities. Regardless of the size of the transaction, a misstep in any of these areas could lead to costly legal disputes.

To protect your interests in a business sale or acquisition, it is extremely important to have a full-service law firm on your side.

Source: The Wall Street Journal, "Amazon to Buy Video Service Twitch for $970 million," Douglas Macmillan and Greg Bensinger, Aug. 26, 2014

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