If you think the era of layoffs will end in 2023, you’ll be disappointed by the flurry of companies that have already announced layoffs this year. The latest to do so is Twitch. According to a Bloomberg report, the Amazon-owned streaming service plans to lay off 500 employees or 35% of staff.
The report also mentioned that the layoffs could happen as early as this week. It was reported that Amazon is still struggling to make Twitch profitable, nine years after its acquisition. At the time of writing this report, Twitch was yet to respond to requests for comments.
The latest announcement further highlights the challenges that Twitch has been going through in terms of boosting its revenue and user count. In March last year, the streaming frontrunner made 400 roles redundant after failing to meet user and revenue growth expectations.
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Apart from Twitch, Amazon has been struggling to find its footing in the gaming sector. Last year, the e-commerce giant shuttered its gaming division and ended its Crown channel and Game Growth group. No fewer than 180 jobs were lost in the process.
Twitch has also blamed part of the problem on rising operating costs to support livestream content at a large scale. In a September 2022 post, the company’s CEO Dan Clancy mentioned that each high-volume streamer on the platform cost the company around $1,000 monthly, based on Amazon Web Service’s interactive video rates.
“Delivering high definition, low latency, always available live video to nearly every corner of the world is expensive,” Clancy wrote. “We don’t typically talk about this because, frankly, you shouldn’t have to think about it. We’d rather you focus on doing what you do best.”
Twitch announced a shutdown in South Korea last month
Earlier in December last year, Twitch announced that it would shut down its operations in Korea on February 27 this year and described the market as “prohibitively expensive”. Clancy at the time said the company made a “significant effort” to lower the network costs associated with operating in Korea but the operation fees remained ten times more expensive compared to most other nations.
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In an effort to keep Twitch running in Korea, the company carried out sweeping changes to their operations including lowering the maximum source quality to 720p and experimenting with a peer-to-peer model for source quality.
“While we had lowered costs from these efforts, our network fees in Korea are still 10 times more expensive than in most other countries,” Clancy wrote. “Twitch has been operating in Korea at a significant loss, and unfortunately there is no pathway forward for our business to run more sustainably in that country.”
Esports is a big deal in Korea with top gamers accorded a similar respect as celebrities. It is estimated that over half of the country’s population are esports fans. The country has dominated competitive gaming worldwide, especially titles like League of Legends and Starcraft. Consequently, Twitch has garnered millions of users from the country.
“I want to reiterate that this was a very difficult decision and one we are very disappointed we had to make,” Clancy wrote. “Korea has always and will continue to play a special role in the international esports community and we are incredibly grateful for the communities they built on Twitch.”
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The expensive Internet fees in Korea have been the subject of many legal battles. Netflix sued a local broadband supplier in 2022 to avoid paying usage charges. However, a court in Seoul ruled that the streaming giant must contribute to the network costs.
Telecom operators in other parts of the world are beginning to adopt the Korean model by pushing content providers to pay for network costs. Earlier last year, telecom operators in India recommended that Internet-based companies compensate telecom operators for using the networks.
