Former Twitch employee explains why split of under-income won’t change

Twitch streamers are demanding a higher revenue split from channel subscriptions, but a former Twitch / Amazon employee explained why this split will only hurt the platform.

Currently, Twitch is offering streamers a 50/50 split of revenue when it comes to channel subscriptions. When viewers pay $ 5 to subscribe to their favorite streamer, around $ 2.50 goes into the streamer’s pocket.

In November 2021, streamer Dezirablegamer took to Twitter to demand a higher income distribution, calling the current 50% model “crazy.” Shortly after, the poll “Changing the distribution of income between streamers and lower minimum payments” became the most supported idea on UserVoice.

While it seems easy for the Amazon-owned company to pay streamers more, a former Twitch employee provided insight into the economics that prevent this from happening.

Why Twitch Can’t Pay Streamers More

Sam chen, a former Twitch / Amazon employee, stepped in to discuss “the real economy nobody wants to talk about.” In an attempt to clarify Twitch’s sub division, Chen explained why the platform cannot pay more streamers per sub.

Chen made his point in three points crowned with a short FAQ. His first point is that the big streamers (xQc, Shroud, Nickmercs) are a “loss leader” for the platform. Anyone who averages around 5,000 or more viewers will make Twitch lose money every time they go live.

This is because it costs Twitch money to host streamers and provide a platform that supports 1080p broadcasts. The number of people watching Great Creators is costing Twitch more than it can earn from that streamer’s subscriptions. Advertising revenue also does not cover the cost of this streamer.

by Chen second point is that mid-level streamers (100-500 concurrent viewers on average) make up for this loss. He said that the number of sub-accounts of these streamers is likely far more than their viewers.

“Twitch cannot be profitable without maximizing the revenue of this group” – Sam Chen

recently, Sam Chen claimed that small streamers could recoup what they cost Twitch to host. Ad revenue also helps Twitch offset its expense to host smaller streamers.

Chen also said that Twitch wanted the bigger streamers to run more ads so the platform could afford to pay sub-income.

Why are streamers costing Twitch money?

Chen also explained why streamers cost Twitch money to host them. Prime submarines are not free. When a viewer uses a Prime Sub, they force Twitch to donate money to streamers from their own pocket.

Additionally, it costs the platform money to provide its viewers with a video. It also costs more when a streamer can produce better quality video. Chen states that Twitch isn’t offering 4k not because it can’t, but because it would cost a lot more to provide that service.

How can Twitch pay streamers more?

Twitch Revenue Breakdown

In order for Twitch to pay streamers more and remain profitable, Chen suggested adopting progressive taxation of larger streamers. Mid-sized streamers may be able to reap the benefits, but larger streamers would earn less income per sub.

However, there is a way to better support viewer side streamers. Bits are a much more efficient way to donate to a streamer. Instead of a 50% discount, Twitch takes less than 30% of the money viewers spend in bits.

For example, if you buy 100 bits, you pay $ 1.40. Twitch only takes $ 0.40 from this transaction. And as the number of bits a viewer purchases increases, the lower percentage Twitch gets from that transaction.

If you buy 10,000 bits for $ 126, Twitch only takes $ 26, or about 20% of the revenue.

Why can’t Twitch replicate payments from other platforms?

The #SubSplit discussion has recently heated up due to the increased revenue split from YouTube and Facebook (70/30). However, Chen also explained why Twitch cannot replicate these divisions.

Facebook and YouTube’s streaming categories don’t compare to something like Twitch. There are a lot more people streaming on Twitch at any given time than on any other platform.

YouTube also has more revenue streams, while Twitch relies on ad revenue and subscriptions. So while it seems like Twitch is a greedy and unfair business, it may not be able to afford a greater distribution of under-income.

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