Twitch: A Tough Decision Demonstrates Long-Term Thinking

November 4th, 2020

Topics: Entrepreneurial Tech Governance Risk Management Social

What should a business—and its leadership—do when antagonized by a third party? When thinking about the wider value chain, is there enough value to bring an antagonist into the fold as a key constituent? How do organizations ultimately make that decision?

Consider each stakeholders’ potential substitutes, switching costs, past precedent (your competitors’ histories are a good place to start), and even potential regulation.

Stuck between a rock and a hard place, Twitch had to draw a line in the sand, finally enforcing years old complaints from the music industry. Facing new pressure from the Recording Industry Association of America (RIAA), Twitch leadership came down on content creators, deleting or archiving content with copyrights violations, which oftentimes was background music.

Removing the content in question may seem harsh, but we doubt the decision was made lightly: To many, supporting creators should be a primary objective — after all, creators are Twitch’s core offering to audiences. We might never see Uber or Lyft limit driver’s shifts or tell them when or where they can drive. A range of substitutes and strong rivals threaten those businesses, whereas Twitch’s competitors are relatively much weaker options.

This calculated risk by Twitch (low risk of substitutes and high switching cost of building viewership on another platform) tells us they made a savvy tradeoff to claw back some of the freedom creators enjoy, and appease a historically antagonistic third party that they have relatively no working relationship with. From our vantage point, this swift, singular decision may prove more effective than a long-term war of attrition in a multi-party negotiation.

Trending Digital Business Topics