It does that to justify cutting revenue splits (of subscriptions and ads) and increasing ad density. The minimum ad density now is generally 4 minutes per hour.
Example: say I'm Pottery Barn and I sell furniture in the US. I sell a table for $500. It costs $100 to make in China, $50 to ship to the US and $150 in store costs (eg utilities, staffing, rent, amortized capex, etc). You might say I've made $200 profit.
But let's say my corporate structure is to have 2 subsidiaries: PB Manufacturing and PB Retail. The first makes the table. The second manages the stores and sells the table.
If PBM charges PBR $150 for the table then PBM makes $50 in profit and PBR makes $150. If PBM charges $300 for the table then PBM makes $200 in profit and PBR breaks even.
This is what I mean when I say Twitch's profitability is a chosen narrative.
There are many reasons to do this. Tax is a big one. Maybe you pay less tax in China so you prefer to take profit there. Maybe you want to argue stores aren't profitable to resist demands for higher wages or higher rents.
The above is an example of "transfer pricing" or "profit shifting". What's the difference? Transfer pricing is illegal. Profit shifting isn't (within limits; it technically has to be "at arm's length" and other requirements).
"Use the same live streaming technology and global infrastructure that powers Twitch."
Did IVS grow out of Twitch? Sure. That core is now a piece of AWS infra though, even though the team was initially built at Twitch.
(Obviously these things are weird to talk about in a vacuum, because all the pieces are 100% owned by the same parent. The splits we see can be changed with the wave of a CFOs pen, usually when they want to change how we view some overarching piece of the business.)
Furthermore... isn't this the crux of Hollywood accounting..?
This is totally untrue but keeps getting repeated. Yes, within Amazon, the non-AWS business units pay AWS to use AWS. But they pay cost plus a small percent, not retail rates.
The cost to non-AWS businesses is the same as if they had to do it all on their own (actually a little less since they get to leverage AWS's economies of scale).
The profitability of the other business units is actually improved this way. They would be paying more if they were independent and doing it on their own. This is why Amazon is so allergic to spinning out AWS as its own business.
You have it backwards: transfer pricing is legal, profit shifting is not.
Transfer pricing is the legal term used to refer to the establishment of prices between related entities pursuant to regulations. The transfer pricing regulations were created to cut down on profit shifting.
And we don't know for real how much Amazon is charging them. Rumors are going, Amazon is charging them a hefty amount for servers, while other says AWS is irrelevant for their Service, so nobody knows for real, officially.
But the recent move to a different handling of video-streams is supposed to change this, as it reduce the costs on Twitch's side, and lets the Streamers pay for it themself. By which I mean AV1(?), where the streamer is encoding all streams in all resolutions, and only sends it to Twitch which then acts as a relay. Claim is, Video-Encoding was the biggest cost for them, after employees, which seems kinda strange.. But maybe it will change their game in the next years, we will see.