Live video streaming is popular, but the resources required to power these services are not cheap, resulting this week in layoffs at Amazon-owned Twitch.
Twitch’s CEO today announced that the platform is laying off “just over 500 people,” signaling that the downsizing is necessary to keep its business sustainable. According to Bloomberg, the layoffs amount to shedding 35% of its staff.
Meanwhile, Amazon says it’ll be “eliminating several hundred roles” at Prime Video and its MGM Studios division, which the e-commerce giant spent $8.45 billion to acquire.
Twitch already went through two rounds of layoffs last year, cutting 400 jobs. But in a blog post, Twitch CEO Dan Clancy wrote: “Unfortunately, despite these efforts, it has become clear that our organization is still meaningfully larger than it needs to be given the size of our business.”
Clancy then revealed the company paid Twitch streamers over $1 billion last year. (For perspective, Amazon bought Twitch in 2014 for $970 million.) The other issue facing Twitch is that the company has “been sized based upon where we optimistically expect our business to be in 3 or more years, not where we’re at today.”
“As with many other companies in the tech space, we are now sizing our organization based upon the current scale of our business and conservative predictions of how we expect to grow in the future,” he added.
The rising costs and layoffs are sparking concerns that Twitch will resort to placing more ads and permitting controversial content in an effort to increase revenue. Last month, Twitch tried relaxing its rules on sexual content, but it was forced to backtrack after some video streamers exploited the changes to post nudity.
Meanwhile, Amazon said it's making its own job cuts to “prioritize our investments for the long-term success of our business,” according to a company executive.
“As a result, we’ve identified opportunities to reduce or discontinue investments in certain areas while increasing our investment and focus on content and product initiatives that deliver the most impact,” SVP of Prime Video and Amazon MGM Studios Mike Hopkins wrote in a memo to employees. Amazon already cut 18,000 jobs last year following a pandemic-era hiring spree.
The layoffs occur when Amazon plans to start showing ads on Prime Video beginning Jan. 29. To remove the ads, subscribers will need to pay an additional $2.99 a month.