🍌 Kick, Twitch, and the $100 Million Streamer

Who owns Twitch's new competitor? Plus, Elon and Zack agree to fight in a cage match

Hi everyone 👋 Turner back again with The Split. Welcome to all new subscribers and the 22,000+ people tuning in each email!

If you missed it, last week I mentioned launching a podcast and adding a related premium tier to The Split. We pushed the launch back a week, the first episode will hit your inbox on Tuesday.

Something I’ve been following this past week is upstart live streaming platform Kick.com. It made headlines signing a $100 million non-exclusive deal with one of Twitch’s top streamers. And the story is crazier than you think. I’ll dig into it below.

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Kick, Twitch, and the $100 Million Streamer

Upstart streaming platform Kick has just signed one of Twitch’s top streamers, xQC. The non-exclusive (???) two-year $100 million deal has a guaranteed base compensation of $70 million, with $30 million in performance-based incentives. Kick markets itself as being more creator-friendly, sharing 95% subscription revenue with streamers (compared to Twitch’s 50%) and 100% of in-stream tips, while offering same-day payouts.

Kick also recently launched a mobile app. It claims it increased watch time on the platform by 2.5x - exciting if you’re a streamer!

The catch: It appears Kick is owned by Stake.com, an online gambling and sports betting site. My guess is xQc’s base compensation includes equity in Kick and/or Stake (thanks to Sasha Kaletsky for keying me on this), and also has certain requirements around converting Kick viewers to sign-ups and active bettors on Stake. Which, as a Curaçao-domiciled online casino, is probably extremely profitable.

It’s possible I’m reading this wrong and the Kick and Stake businesses remain separate. The founders have been adamant in interviews that gambling content is a small amount of their watch time, which could be true based on this screenshot of the homepage from Monday night. You can see in the top left that xQc is live with 52,498 viewers, which appears to comprise most of the “Only Up!” category.

Another look on Tuesday morning shows Slots & Casino as the top category. It’s 3x higher than “Just Chatting”, which is typically attractive women interacting with viewers. A look later in the afternoon on Tuesday shows “Pools, Hot Tubs, & Bikinis” as the third most popular category.

Looking through streams in the Casinos & Slots category, 8 of the top 12 streamers are streaming games from Stake.com (circled in red below).

The top Casinos & Slots streamer “ROSHTEIN” was actually taking a break when I first tuned in to his stream. While he was gone, the stream played a 30-minute ad for a Stake game similar to Candy Crush (with a very catch song!). There’s also some interesting commentary in the chat…

There are moral implications around this that I’ll let you come to your own conclusions on.

From purely a business perspective, this would be like if Twitch owned the game publishers. Kick can directly monetize all activity on the platform with its own content. And this also allows them to build content that has the best monetization when streamed live.

Twitch has struggled to crack a monetization strategy for live streaming. It shows pre-roll ads when loading a stream, and viewers can tip a streamer and pay a subscription for additional features (and an Amazon Prime membership comes with 1 free Twitch sub).

From purely a numbers stand point, it’s possible that a) converting live stream viewers to active gambling app users and/or b) integrating gambling, betting, and other forms of transactions directly into streams monetizes at a much higher rate than Twitch’s current model.

If someone watches a stream for 120+ minutes, Twitch leaves a lot on the table after those first 30-60 seconds with a pre-roll ad (though Twitch does have other ad breaks). Lots of streams grow in popularity due to viral short-form clips, and any videos of interesting moments will probably double as ads for Stake’s other products.

For Twitch, this could all mean multiple things.

One, Twitch may know its viewership will retain even if they lose top streamers. Personally, I’m not sure how true this is. Viewership has been slowly declining from mid-2021 highs, but its still up nearly 2x from January 2020 after the pandemic-driven surge.

If Twitch knows its core viewers will stick around no matter what, it creates a big hole to fill. This leaves whitespace, which makes Twitch attractive to new streamers, and it’s possible Twitch doesn’t have to guarantee these up and comers as much as its super stars that are leaving.

Second, it could represent Amazon giving up on its own streaming platform. Some have speculated they may shut down Twitch entirely. I doubt this is the case, but if it is, I’d assume it would be part of a broader strategy shift towards powering the back-end of all the other streaming platforms (“the AWS of streaming”).

The original infrastructure that powered Twitch’s streams has evolved into AWS IVS (Interactive Video Service). This is what Kick.com is currently using, which is essentially a 8-10x markup on Amazon’s cost according to this ex-Twitch engineer.

If this is the case, it essentially means that instead of paying xQc’s $100 million deal themselves, Twitch is offloading that unprofitable deal to a competitor (who it’s actually profitable for?) that is also paying to use Amazon-owned Twitch’s very profitable infrastructure.

I’m not intimately familiar with what all is going on at Twitch. But it feels like a crucial moment for them.

Let me know what you think in the poll, and see what everyone else is thinking in the comments.

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🚀 Product Launches

Applications Closing The Mint Fintech Accelerator: Better Tomorrow Venture’s new fintech-focused program has two slots left. Applications close June 30th, the program starts August 1st, and wraps up with a demo day October 12th. Apply here.

TikTok’s AI-Generated Ad Scripts: Similar to Facebook and LinkedIn, TikTok is using AI to help write better scripts for video ads. Its one small example of many practical use cases for AI.

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🔗 News and Charts

YouTube Lowers Threshold for Monetization: In news related to Kick and Twitch, YouTube is opening up its partner program to more creators. Ad-revenue share, channel subscriptions, product promotion in YouTube Shopping, and more live features around chat, stickers, and gifting.

YC Leads in Accelerator Unicorn Creation Rate: 5.4% of YC companies from its 2010-2015 cohorts have reached unicorn status.

$817 Billion of US Retail Inventory Was Returned in 2022: This number doesn’t seem real, but is another thing driving the mega trends around re-commerce, secondhand, swaps, and off-price / discount retail.

The Japanese are Working Longer: Half the population age 65-69 and one in three between age 70-74 are still in the workforce. I think demographic, financial, and societal trends will cause this to increasingly become the norm globally. Hopefully things like AI, automation, and robotics help us make a smooth transition!

‘We Can’t Decouple’ From China - Raytheon CEO: (Don’t tell anyone I told you to open this paywalled article in incognito mode) Raytheon claims it would be impossible to completely cut ties from China without severely disrupting its supply chain consisting of several thousands of suppliers.

Rivian Joins Ford and GM to Adopt Tesla’s Supercharger Network: A few years ago I remember thinking wall street was significantly discounting how strategic the supercharger network Tesla would be. In just the past week, Ford, GM, and now Rivian have all caved and adopted NACS. This means Tesla has a massive head start in all component manufacturing and design that its competitors will all be forced to adopt.

Speaking of cars, how many of us would have guessed this chart below would push Carvana to the edge of bankruptcy?

Chinese Economic Data Fuels Gloom Over Recovery: It’s hard to tell if this is pandemic-driven, but China’s high youth unemployment rates don’t seem to be getting better.

Study Finds Psychadelics Reopen Critical Development Windows: Scientists have found that certain psychedelic drugs reopen the social reward critical learning period, or in other words the reason why “kids are much better at learning new things than adults”.

How MLB’s Rule Changes is Winning New Fans: Major League Baseball (MLB) has seen declining fan interest over the past few decades, largely due to 3+ hour games and long stretches with no action. New rules like a pitch time limit have decreased the average length of games down 15% YoY. In-game attendance is up 6.8% YoY, and ESPN and TBS viewership are up 7% and 26%, respectively.

Chrome is Losing Market Share: Gains from Edge and Opera appear to be coming from incorporating Bing and ChatGPT, respectively. The next logical step is a Bard integration in Chrome.

And finally, an alarming chart that shouldn’t surprise regular readers of The Split.

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💌 ICYMI

Zuck and Elon agree to fight in a cage match: Who do you have?

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📚 Long Reads

The Binge Purge: Chaos in Hollywood as the streaming model starts to come undone.

America’s Hidden Urban Lab - The South: Devon Zuegel explores why most of the innovative approaches to city building, which promote things like walkability and public spaces, tend to happen in the Southeast.

What Happened to Tandem: Rajiv Ayyangar gives a rare, raw look behind the scenes of raising the hottest round at YC Demo Day, riding the remote work wave when COVID hit, and the journey to ultimately winding the company down.

“While I'm satisfied with how we wound down, the months preceding were some of the darker times in the startup journey for me. I struggled with feelings of failure on multiple fronts… When the world didn’t want Tandem, it felt like the world didn’t want me.”

SoftBank Ready to go on ‘Counteroffensive’: Masa was famous for his 300-year investment time horizon and slide decks predicting how AI would change the world. He unfortunately struggled raising his next fund’s, and was on the sidelines as we entered the AI bubble. Until…

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🍌 Monkey Business

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