Some interesting bits about this system and how it's implemented:

Blocking is implemented using volume control in the flash player. The flash player has multiple bugs that currently undo the blocking.

Twitch already has an API used for playing VODs and streams on devices that don't run Flash, and as a result of volume-control-based muting, muting does not apply to any of these devices (or software using the API, of which there is plenty).

Worse still, not only does muting not apply to the API, but ads don't show up either. So muting will (at least in the short term) drive users to playback via API in order to avoid it, and coincidentally reduce ad impressions. Ideally Twitch will address this in the future by muting the actual VODs at the file level instead of in the player.

The Content ID detection database they're using (from a third party, Audible Magic) includes many game soundtracks and other licensed pieces of audio that are used legally by actual games. Twitch calls this out in their announcement, so they knew it would be happening. As a result, VODs that merely contain playback of a real game end up muted - one of the examples going around the web right now is footage of Fallout 3, because FO3's soundtrack contained some licensed songs from the 50s/60s that are in Audible Magic's database. [3]

Suppressing copyrighted music from your streams is complicated further by the fact that the database is stated to contain ambient audio and not just music; many games do not have a separate volume slider for ambient audio, even if they have one for music. Suppressing that audio may require muting the game entirely.

Some games also tie licensed music into game-relevant content; Fallout 3 is one of them - the in-game radio has narration and dialogue from plot-relevant characters mixed in between the songs. Muting the audio or not using the in-game radio would actually hinder the experience of playing the game in a measurable way as a result.

Services like Audible Magic also have a long track record of asserting incorrect ownership for content. Many indie game developers & musicians were hit by an erroneous banwave as a result of this technology last year due to a shady service called TuneCore asserting ownership of music published by their customers - despite their customers not authorizing this behavior. [1]

Because Content ID takedowns on YouTube (and now Twitch) do not operate through the legal system or the DMCA hierarchy, there is no legal recourse available to content creators or rightsholders in this scenario, and the companies that have deals with YT/Twitch are free to siphon ad money or take down content whenever and wherever they like. With DMCA takedown notices there is a counter-notice mechanism, but since these content ID systems are based on private agreements between companies, no such mechanism exists.

The service twitch uses charges per-request for content identification so this likely influenced the decision to mute 30-minute blocks instead of at a smaller level of granularity. At the size of Twitch's content database they may be paying a significant amount of money to Audible Magic for this service. [2]

[1] http://www.vg247.com/2013/12/18/99-of-youtube-gaming-channel...

[2] https://www.audiblemagic.com/copyright-compliance-pricing/

[3] http://www.twitch.tv/dansgaming/b/550331246