How Twitch Works

Twitch is monetized via advertising and subscription fees. A basic Twitch membership is free and allows you to view all kinds of content, chat on people's streams and broadcast gameplay. Ads will run when your first go to a channel, and periodically throughout the stream. Twitch may be compelling to advertisers because it can get them access to a certain demographic that isn't likely to be watching TV and spends a lot of time on their site -- 106 minutes per user each day day, on average [source: Twitch Advertising].

For $8.99 a month (as of mid-2014), users can upgrade to a Turbo membership, which eliminates most advertising except for front-page takeover ads, and gives them a special Turbo badge, custom emoticons and more chat colors.

Broadcasters who become members of the Twitch Partner Program can put ads in their streams, and they get a portion of the revenue for every 1000 advertisements viewed on their channel. That take is paid out monthly 45 days after the end of the month, provided the broadcaster has accumulated $100 in revenue. Partners also get other perks, including priority for front page and promotional directory placement. Chosen top partners can also charge subscription fees to their users in exchange for extra perks, like HD streams, access to archived videos, exclusive chat sessions, limited advertising, extra emoticons and a special badge. The fee is generally $4.99 a month.

Some people even manage to support themselves financially via Twitch. Jayson Love, through his Man_vs_Game channel, chats with users as he attempts to beat all sorts of games. He managed to quit his day job and support himself on revenue from Twitch's Partner Program and subscription fees along with merchandising [source: Morris]. And Jeffrey Shih (screen name Trump) did something similar with his educational Twitch channel [source: Magdaleno]. Twitch has more than 6,400 Partner Program members as of 2014 [source: Twitch Advertising].

Users are allowed to accept donations by adding a PayPal button image that links to a PayPal payment link on their channel page. Twitch has even partnered with other companies to offer college scholarships to talented gamers.

Aside from ad revenue, Twitch raised $15 million in 2012 and $20 million in 2013 from investors [sources: Hockenson, MacMillan, Stone]. And in even bigger, albeit uncertain, news, there are reports that Google (owner of streaming competitor YouTube) is in talks to purchase Twitch, with some speculation that it could go for upwards of $1 billion [sources: Heaven, Reisinger, Stone]. Some worry that such a takeover might lead to copyright crackdowns on the users and content, something that happens to some broadcasters on YouTube when game companies use YouTube's Content ID system to identify use of their games in videos. But such a huge move could give Twitch all the backing it needs to keep going and expand.