Amazon's interest in the video game world is taking a huge step forward with Monday's $970 million deal to buy game streaming service Twitch Interactive.
The all-cash deal, which came out of the blue after months of unconfirmed reports that Google's YouTube unit was about to buy the company, will give Amazon an extraordinarily popular streaming video arm—one that could actually rival YouTube. It also continues the company's ongoing efforts to assume a significant role in the gaming industry.
Twitch, which was founded in June 2011, has seen its profile skyrocket since last November, thanks in large part to partnerships with Microsoft's Xbox One and Sony's PlayStation 4, letting owners of both systems live-stream gameplay online.
The platform boasts a community of more than 55 million unique users each month, with over 1 million broadcasters—and visitors averaging 106 minutes per day on the service. Total monthly views in July topped 15 billion minutes. Simply put, it has become the Internet's go-to spot to watch and broadcast game streaming.
Among Twitch's investors are start-up incubator Y Combinator, venture capitalist Alsop Louie Partners and game publisher Take-Two Interactive Software.
"Amazon and Twitch optimize for our customers first and are both believers in the future of gaming," Twitch CEO Emmett Shear said in a statement. "Being part of Amazon will let us do even more for our community. We will be able to create tools and services faster than we could have independently. This change will mean great things for our community, and will let us bring Twitch to even more people around the world."
For Amazon, the purchase is the latest in a series of high-profile moves involving video games. In addition to a music, movie and television streaming device, the company's recently launched Fire TV is also being positioned as a gaming system—one that has the backing of Electronic Arts, Ubisoft, Sega and Disney.
The retailer has also quietly been building its own game-making studio. In February, Amazon acquired Double Helix Games, maker of "Killer Instinct" on the Xbox One and the classic title "Earthworm Jim." At the same time, it has been recruiting top- level talent from around the industry, including Kim Swift, designer of Valve Software's "Portal" and "Far Cry 2" lead Clint Hocking.
"I think we're going to see Amazon's name pop up more and more," John Taylor, managing director at Arcadia Investment told CNBC in June. "They're looking at formats of the future, which are much more open and support a wider variety of business models. These fundamentally create less friction between the game provider, the developer and the user. "
—By Chris Morris, special to CNBC