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What Mixer’s meltdown means for Microsoft

June 25, 2020, 2:00 PM UTC

Microsoft’s sudden closing of its Mixer video game streaming service this week underscores the challenges of creating a strong competitor to the leaders in the field: Amazon’s Twitch and YouTube.

With Mixer, Microsoft was attempting to create a service for watching other gamers play popular titles like Fortnite. Despite years in the video game business as maker of the popular Xbox game console, Microsoft had failed to foresee the rise of game streaming.

To catch up, Microsoft bought the small Twitch-like service Beam in 2016 for an undisclosed amount and renamed it Mixer. To improve its chances, Microsoft spent big money to upgrade the service’s technology. Then, in 2019, it opened its checkbook again to poach high-profile streamer Ninja to the service, hoping he would bring his huge viewing audience with him. But they never came in large enough numbers.

“People looked at Mixer as a longer-term play,” said Remer Rietkerk, an e-sports analyst for research firm NewZoo. The company’s decision to shutter Mixer “took everyone a little bit by surprise,” he added.

Michael Pachter, a Wedbush Securities analyst, told Fortune in an email that Microsoft “taking on Twitch is analogous to Google taking on Facebook with Google+,” referring to the search giant’s failed effort in 2011 to create a popular social networking service.

“It didn’t ever develop the critical mass of streamers or of viewers to catch up,” Pachter said. “That might have happened over time, but they appear to have concluded it wasn’t worth the effort.”

By the end of 2019—months after luring Ninja—Mixer was the least popular of its peers, behind YouTube, Facebook, Twitch, Snapchat, and TikTok, the popular video-sharing service owned by Chinese tech startup ByteDance, according to Nielsen’s SuperData. 

Additionally, prior to closing, Mixer’s average minute audience—the average number of viewers watching the service at any given minute—was only 3% that of Twitch, SuperData said.

As SuperData analyst Carter Rogers explained, Mixer, despite some innovative features like a split-screen viewing mode, was ultimately too similar to Twitch and not compelling enough to gain a mass audience. Although viewers watched Ninja play games on Mixer, they then went back to Twitch to watch other streamers instead of staying on Microsoft’s service to watch others.

In addition to closing Mixer, Microsoft said it would partner with Facebook and its gaming unit for video game live-streaming. That deal involves merging the two game-streaming communities into one and developing unspecified “game-streaming experiences” powered by Microsoft’s nascent xCloud gaming service, according to a Microsoft spokesperson.

The Facebook partnership could be crucial to Microsoft’s xCloud gaming service, which lets people stream video games from Microsoft’s cloud data centers, Rogers explained. For one thing, Facebook provides a bigger user base for Microsoft to test its xCloud service.

But it could be years before game streaming is anywhere near as mainstream as gaming using video game consoles or mobile gaming apps. And it’s a highly competitive business.

Google has its Stadia cloud game-streaming service, which has “had a rocky launch” since debuting in November, said Rietkerk. Meanwhile, Amazon is reportedly also developing a cloud game-streaming service. 

Pachter speculated that a gaming alliance could open the door to Facebook buying additional cloud-computing services like online storage or machine-learning tools from Microsoft’s Azure unit. It would be a huge win for Microsoft and a major change in thinking by Facebook executives, who have long prided themselves on their data center chops and independence from cloud-computing giants like Amazon and Microsoft.

Microsoft has a partnership with video game console rival Sony, in which the PlayStation maker will use Azure cloud-computing services for its future game-streaming projects, among other initiatives.

But for now, at least, the Microsoft spokesperson said the company’s deal with Facebook is not like its partnership with Sony: Facebook will not be using any Azure services.