NEW YORK (TheStreet) -- Google (GOOG) reportedly has struck a deal or is close to purchasing video game streaming site Twitch for more than $1 billion in cash. Microsoft (MSFT) and a number of other unnamed suitors are also reportedly interested in purchasing the wildly successful company.

According to a report in Variety, Google's YouTube division is close to announcing it will pay more than $1 billion for the start-up service.

Google shares fell 0.5% to $518.02 in early trading in New York.


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Twitch allows users to watch and stream live video games on their Microsoft Xbox or Sony  (SNE) PlayStation 4 device. The three-year-old start-up reportedly has more than 45 million monthly users. It also has distribution deals with CBS' (CBS) GameSpot, Joystick and others.

According to the experts at Qwilt, Twitch, at times, outranks major online sports sites such as ESPN (ABC), WWE (WWE) and Major League Baseball combined. Looking at its success in another way, Twitch accounted for more than 1.3% of all downstream Internet bandwidth usage in North America in March.

The Wall Street Journal said Google is interested but talks are only in the early stages. Inside sources believe a deal isn't close to be completed. Those sources think Twitch could also be considering raising additional additional funding instead of selling the company.

Twitch was created by Justin Kan and Emmett Shear, co-founders of Justin.tv, one of the first live streaming Web sites of user-generated material. Shear serves as CEO of Twitch. To date, the company has raised $35 million in funding from investors including Bessemer Venture Partners, Alsop Louie Partners, WestSummit Capital, Take-Two Interactive Software, Thrive Capital and Draper Associates.

The purchase could mean a boost for Google/YouTube's Live service of games music, sports, news and special events. Live currently trails Twitch in overall streaming traffic by volume.

Variety reported YouTube is preparing for a challenge to the deal by U.S. regulators. Because it delivers more than 6 billion hours of streaming video content each month, YouTube believes the Justice Department will have a number of questions concerning possible anti-competitive issues before approving the purchase of Twitch.

-- Written by Gary Krakow in New York.

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Gary Krakow is TheStreet's Senior Technology Correspondent.

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