Microsoft is taking on Amazon's $970 Twitch acquisition - here's why it's a smart move

Microsoft today announced a new game streaming service called Beam, coming to the Xbox One console and Windows 10 in an update coming next year.

Beam, based on technology that Microsoft got in an acquisition of a startup of the same name, brings Microsoft directly into competition with Twitch - the current leader in the mega-hot video game streaming space, which Amazon bought for a whopping $970 million in 2014.

At first blush, it seems like a weird move for Microsoft. Twitch is a well-established juggernaut, with only YouTube having any claim to knocking it off the throne. Microsoft, with no video sharing service to speak of, is a real underdog in the space.

And yet, it makes perfect sense for Microsoft to get into the streaming business, now of all times.

The accidental genius of Twitch was that it builds whole entire communities around certain games. A video game's fortunes can be made or lost depending on whether it's embraced by influential Twitch streamers. A popular game on Twitch sells more copies, players spend more on microtransactions, and keep playing the game longer.

Microsoft desperately needs that kind of boosted engagement. The world continues to leave Microsoft Windows behind, as new-generation apps come to iPhone and Android before they come to the good old PC.

But the one thing that Windows is better at than iPhone, Android, Macs, or any other computing platform on the planet...is video games. That's been true since the earliest days of Windows, and it's true now.

Anything that gets players playing more games on Windows 10 and the Windows-powered Xbox One console is good for Microsoft. If Beam takes off, it gives developers one big reason to make sure that their games come to Windows and Xbox. Microsoft itself has brought former Xbox exclusives like "Gears of War 4" to Windows 10.

That's good for making sure Windows stays stocked up with games, and thus giving people a major reason to use Windows. From there, theoretically, Windows users will stick around and spend more cash on premium services like Office 365 or OneDrive. Not to mention that Beam itself will require Microsot's $60/year Xbox Live subscription.

Plus, as a nice bonus, it deprives Microsoft's cloud rival Amazon of a certain amount of revenue.

Of course, this hinges on Microsoft making a good enough sales pitch to the notoriously finicky gamer community to switch from the very well established Twitch. But the payoff, if this works, is a real reason for people to stick with Windows, as challenges to the platform mount.

Disclosure: Jeff Bezos is an investor in Business Insider through hispersonal investment company Bezos Expeditions.