This week, we learned that Microsoft is shutting down Mixer
. As a result of this move, top tier streamer talent is now free to sign with Twitch, Facebook Gaming or any other platform of their choosing. While this may have been surprising to many, the reality is this partnership was doomed from the start.
In business school, we studied a case on top tier financial analysts who were given the opportunity to go to competing investment banks.
While their individual performance was exceptional, the case study found that once they left the original firm expectations for their continued success never fully materialized. In fact, a few short years after switching firms; they were no longer ranked as top tier financial analysts.
In the case of Ninja moving from Twitch to Mixer, we might have expected his massive audience to move with him. Even though Ninja is one of the top stars who has secured endorsement deals with Uber & Samsung, this was always going to be an uphill battle. The reality is that despite these advantages, there are often benefits to the platform + talent pairing that are not obvious when analyzed at the macro level.
One might expect that the platform is agnostic to the talent. However, this ignores many tried and true proof points. As Ninja and many others are contemplating their next moves, they would be wise to return to Twitch as they gives them the best opportunity for long term success.
While Ninja was one of the top stars on Twitch, he wasn’t the only star of interest. In fact, many of his subscribers were working to build their own streaming channels by following his lead. They had seen how Ninja had worked for a decade to build a fan base. And, how he had recently earned quite a bit of success by monetizing his success. As any startup knows, you take your wins where you can get them.
Since they didn’t receive a massive incentive to shift platforms, they were going to be less likely to follow Ninja even though they maintained a high degree of affinity for his channel. For example, if you had worked to build a channel with thousands or ten of thousands of subscribers; you weren't simply going to jump over to Mixer just because Ninja did.
In essence, while we might often think that the switching costs of an online platform to be low; the move to Mixer and the subsequent audience declines shows that this friction is higher than most people might have imagined.
Although Twitch is currently owned by Amazon, it is allowed to singularly focus on creating the best streaming platform out there. In many ways, Amazon follows the playbook of former industrial conglomerates like General Electric. They aim for leadership in their space and are willing to run at neutral or negative margin to achieve a long term competitive advantage.
Jeff Bezos is famous for building and buying businesses with a flywheel effect. These businesses create an ongoing momentum around the product or service that makes it increasingly difficult to compete with their offerings over time.
For Twitch, they have elite streamers like Ninja that attract emerging streamers. As these emerging streamers experience early success, it creates a feedback loop that helps the entire platform improve.
In addition, Amazon is known for focusing on the long tail of offerings. While he realizes that there are key products and services that are going to bring people in, there are an even larger number of offerings that will keep customers coming back. It is entirely possible that the majority of streamers on Twitch have enough subscribers that they are in aggregate more valuable for advertisers than a small number of top tier streamers.
With a larger number of users and a focus on iteration and improvement, one could see how Twitch can continue to deliver incremental value to the end user whether they are an established or emerging talent.
Initially some compared Ninja's move to Mixer to that of an NBA star switching teams. Kevin Durant going from the Oklahoma City Thunder to the Golden State Warriors. As we all know, once he partnered up with Steph Curry and others, the collective group won additional championships.
Unfortunately, this is not quite the right comparison. The NBA is an established platform that has more portability of superstars as of late. In fact, one could argue that LeBron James going from Cleveland to Miami paved the way for Durant to make a similar move years later.
When the switch happened, James was criticized tremendously. However, his focus was on winning a championship and he wasn’t super interested in what the haters had to say.
Even with all the talent that the Miami Heat had, it still took time for them to put the pieces together to win an NBA championship.
For Ninja leaving Twitch to go to Mixer was more like a star NFL player joining the upstart XFL in football or the Big 3 in basketball. An upstart franchise is going to be able to pay a lot for the partnership with a very limited number of stars.
Ultimately, they can’t afford everyone. So, they bank on that star bringing their audience with them. As a result, it is likely that Ninja also got equity in Mixer which is probably now worthless.
Unfortunately, that strategy actually makes it much less likely for the partnership to become fruitful. Every dollar spent on Ninja and other top tier talent was a dollar that wasn't able to be invested in improving the platform. It was much more akin to a silver bullet versus the cumulative gains that are needed to make a platform meaningful. These gains often take quite a bit of time to materialize but are often much more durable.
Although Mixer is shutting down to partner with Facebook, Ninja will be just fine. His audience loves him. Jessica and Tyler are building a globally competitive brand with massive crossover appeal. Based on what we know about how platforms help stars and vice versa, they would be wise to negotiate a monster deal to return to Twitch by leveraging the interest that Facebook likely has in seeding their platform with top tier talent.
It is likely that because their previous partnership was fruitful, they will be able to take the platform to the next level based on lessons learned from the short lived experiment with Mixer. And, based on how Ninja has engaged with the Mixer community, he is likely to bring a large number of them to Twitch which could likely be even more valuable to the platform than Ninja moving over independently.
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