Last Tuesday at GDC, Google unveiled its cloud gaming solution that promises to solve a number of problems for gamers, dubbed Stadia, to much media buzz and attention. While many are excited about the platform to end all gaming platform wars, others have expressed skepticism about how Stadia will actually work. My personal first reaction was more along the lines of the latter group, but I decided to dig deeper, weigh all the pros, cons, and science in between. Bear in mind that this is just my personal view, but I’d love to spark a discussion and hear other opinions as well. So — here goes!
So What Exactly Is Stadia?
Stadia is “a cloud-based gaming platform” which will not be tied to a specific hardware box, but will be accessible over the internet on platforms like internet browsers, personal computers, TVs and mobile devices. According to Polygon, Stadia can stream games in 60 fps, with HDR and 4K resolution, with future upgrades promising to achieve resolutions up to 8K and framerates up to 120 fps. The platform will be powered by over 200 of Google’s worldwide data centers.
There is one piece of hardware Stadia will offer — a controller which will connect to the cloud via wi-fi and feature special buttons for sharing via YouTube or using Google Assistant.
So why Stadia? Well, Google aims to tackle game developers’ pain points like some of those related to online multiplayer. Limitations like a poor internet connection of one player can diminish the whole group’s experience, for example. And there will be some unique features as well: for example, players will be able to jump into a game living on Stadia near-instantly, with only the press of a button. Google also promises “no cheating, and no hacking” in multiplayer games.
It’s not just online multiplayer — Google also promises to improve the neglected couch co-op experience and make it a thing again. Yes, that’s right, local multiplayer powered by a cloud platform.
All in all, Stadia’s bottom line is to deliver a seamless multiplayer experience with a platform available to everyone, and to break down the barriers of access to high-end games that have traditionally required a substantial hardware investment from the consumer. Sounds like a killer elevator pitch — but is it really?
Latency, Latency, Latency
One issue that many commentators on social media have pointed out is the main point of issue in online multiplayer — latency. Latency is “a time interval between a stimulation and response” or, in simpler terms, the time it takes between an action and whatever change it causes to occur. In communications, latency is often referred to as ping and measured in milliseconds (ms). The important thing to note about latency is that it is limited by the laws of physics, because generally speaking, the speed at which data is transmitted has an absolute upper limit of 299,792,458 m/s. Latency is also the reason why multiplayer games like League of Legends or Counter-Strike: Global Offensive have server regions — the farther away from each other players are, the greater latency will be. And low pings are not just dependent on your ISP and internet plan, either; every source or intermediary device in the sequence contributes to latency (computer mouse, routers, etc.) and cable connections are always superior to wireless, which is also why all professional esports players use wired peripherals.
Here’s why I think Stadia will not solve latency issues: it’s effectively adding additional layers (the streaming server, also known as YouTube, and most likely a runtime layer that lives between a game’s dedicated server and the streaming server) between the player’s computer and the game server. That’s because there is latency in every connection, even between your computer mouse and your processor, and every additional layer increases latency. For every input or action you make, data will need to travel to the streaming server first, then be processed and rendered in-game, and then the image will need to be streamed back to you. Any specialized gaming devices like keyboards and mice will thus be rendered obsolete. And as for playing on a wireless device like a smartphone or tablet? Most likely inferior to playing on a wired device by far.
Optic Fiber Coverage
This one is strongly related to the latency issue. I didn’t want to give too much attention to the relevance of internet connections, because in an online multiplayer context, its importance is a given. But here’s the catch with Stadia — because of the latency issues described above, it is even more crucial for Stadia users to have a fast connection with plenty of bandwidth.
I come from a small, Central European country which has great optic fiber coverage. Console prices here are not astronomical in relation to the average net monthly salary — new PS4 Pros and Nintendo Switches are being sold at retail for 499 EUR and 339 EUR, respectively, while the average net salary is 1,115.98 EUR per month. We are also one of the rare first world countries that actually has console retailers selling unlocked or homebrewed devices as if it were completely normal. So save for the limited interest that an exclusive Stadia release may attract, I don’t foresee a lot of traction in this area. Who, then, is the target consumer, and where do they live?
My first assumption would be the US, since that is Google’s country of residence, after all. But did you know that the US only has a 25% optic fiber coverage? Granted that’s still around 82 million consumers with access to high-speed internet, but is it not also fair to assume that many of those consumers already have a PC or console capable of playing the game with a decent frame rate and graphics quality?
Another compelling candidate for a potential market is India, an emerging economy with an explosive growth of mobile penetration. According to this report, 420 million Indian mobile users with a 4G network connection consumed 11GB of mobile data per month on average. The Bharat Broadband Network, India’s national optic fiber network, reportedly only covers around 14.000 of the 250.000 gram panchayats (local self-governance entities), though the precise number of GPs covered as of 2019 is unclear. To extend internet access to consumers beyond the reach of optic fiber landlines, wi-fi hotspots are also being rolled out. While those 420 million smartphone users certainly seem like a ripe opportunity, the underdeveloped network infrastructure may prove to be a mighty barrier.
Existing Competition We’ve Never Heard Of
Of course, those of us active in the video game industry (or at least related industries like esports) have been familiar with the concept of cloud gaming. A simple search reveals competitors like Vortex, Parsec Gaming, Paperspace, and Loudplay just on the first results page. While it is true that Stadia has a massive competitive advantage in the form of Google’s data center network covering over 200 countries and proprietary streaming tech in the form of YouTube, none of the incumbents have managed to significantly penetrate the market.
… And Some We Have Heard Of
To be frank, given all of the technological issues that come with cloud gaming, Google is probably one of the few companies that could actually pull it off. I think only Microsoft has the infrastructure, video game development and marketing, and B2C product know-how required to develop, launch, and operate such a service. In fact, Microsoft did announce their upcoming foray into platform-agnostic cloud game streaming at E3 last year, presenting a public demo of Project xCloud, as the service has been codenamed, earlier this month. Unfortunately, the demo shows that the xCloud service leaves much to be desired — namely, improved latency!
Speaking of established competitors, another big name comes to mind — Valve Corporation. The developer of several successful video game titles as well as the market-leading digital video game platform is noted for its numerous innovations and for living on the cutting edge of the industry. For example, Valve supports virtual reality games and apps with its SteamVR interface, which was introduced in 2014. They’ve also dabbled in streaming with the Steam Link, a device that enables users to stream games from a main PC (which is used for processing) to another display device, either wirelessly or via ethernet. As with Microsoft, Valve has a lot of useful puzzle pieces, but they haven’t (yet) decided to use them to upgrade the Steam platform with a cloud gaming feature, even though they are arguably in the best position to at least test it out.
Onboarding Game Developers Will Be Tough
Anyone following the console wars will remember one of the most common recurring objections gamers have against video game consoles: the lack of 3rd party games. Nintendo has infamously been the target of many such complaints, particularly when it came to its failed previous generation console, the Wii U. The bottom line is that developers still need to have a positive return on the investment that is developing or porting a game to a particular console. If they deem a particular console as not having enough users, they just won’t develop games for it. And of course, this is a vicious cycle — convincing gamers to buy a console is much harder if its library of games is not stocked well enough.
But! Having said that, it seems that Google has struck some partnership deals ahead of the Stadia announcement. For example, it’s fair to assume that Ubisoft is on board with Stadia since Assassin’s Creed: Odyssey was featured in the live demo. Unity has also announced that they would be supporting Stadia in a blog post published shortly after Google’s big reveal. However, fan reactions on their social media pages have been less than enthusiastic. About that…
Do People Even Want Stadia?
At the heart of every business is the ability to deliver value to consumers. The higher the perceived value gained from owning or using a product or service, the more a consumer is willing to pay for said product or service. If the cost price of a product is low enough, then the difference between list price and cost price equals (gross) profit. Here’s the catch — if the consumer’s perceived value is lower than the list price, they won’t buy. So does Stadia deliver on value?
So far, public response on social media has not been encouraging for Stadia. Similar to the sentiment expressed by Unity’s fans, followers of gaming news outlet Polygon don’t seem too excited about this. To try and get a feel of whether or not gamers are down with Stadia, I analyzed the comments posted under one of Polygon’s Stadia-related Facebook posts. I sorted each comment into four groups by sentiment: positive, neutral or balanced, skeptic or humorous, and negative or not interested. Out of 125 comments, only 20 were enthusiastic about Stadia. Another 20 posters had a neutral view, or mentioned both pros and cons. 35 comments expressed disbelief or skepticism regarding the platform, many in a cynical or humorous tone. The rest, a whopping 54, said that they weren’t interested in Stadia or had a negative attitude towards either Stadia or even Google itself.
Comments on Polygon’s article itself were similarly skeptical of Google’s promises to disrupt multiplayer gaming. Readers made valid points, for example how game streaming has nothing to do with local co-op and that it would be ridiculous to send couch co-op data to a remote server and then back again. Here’s one comment I personally enjoyed very much:
At this point, it’s difficult to tell what value Stadia will deliver since it’s still unclear who its target audience and markets are. As a passionate gamer with a collection of home consoles going as far back as the SNES, I like purchasing actual physical versions of my favorite games, and I also have a humble collection of amiibos and other merchandise. Together, my partner and I have a Steam collection of over 300 games — that’s not counting all of our physical and special edition copies. I have a Nintendo Switch Online subscription although I hardly ever find the time to play Super Smash Bros. Ultimate or Splatoon 2 anymore; and the only reason I actually decided to pay up is to unlock online multiplayer on the Switch. At one point, I did consider an Origin Access subscription, but then decided against it — with a library of 300 games, many of them never played, why pay for access to something I may or may not ever use?
Business Model Poses Questions
Big questions. Google’s most valuable IP is its machine learning algorithm, and I think it’s safe to assume Stadia will make use of this proprietary tech. After all, it’s something Google has most experience with; by collecting gameplay data generated by millions of Stadia users, Google may then offer data aggregates or even analytics tools to game developers who deploy their game on Stadia.
I’m not sure whether they would be delivering anything new with this approach, however, since developers already use a variety of analytics tools in their games. Sometimes, adding third-party tools to a game with the intent of improving attribution (which marketing campaign or channel a particular user came from) can backfire, as was demonstrated last year in the Red Shell controversy. In a nutshell, a Reddit user discovered the Red Shell software in one of their games and over the next couple of weeks, over 50 titles were also found to include what the community had started referring to as “spyware”. Several games, including well-known titles like The Elder Scrolls Online and Conan Exiles, decided to pull the Red Shell library files following the outcry. Needless to say, Stadia can expect similar pushback on its likely Google Analytics integration.
And then there are ads. Depending on how the implementation of ads like pop-ups and banners will be handled, this could arguably be the best way to monetize Stadia. If Stadia will come in the form of a launcher/store similar to, say, Steam or Play Store, then the interface can easily include paid promotions. With a high enough user base, Stadia will be able to market its ad space to game developers and publishers looking to boost exposure. Of course, this would all depend on whether access to Stadia’s game library would be offered as a subscription (think Origin Access and similar plans) or if they’d need to purchase each game title separately (think Steam or Epic Store).
Any other ad-powered solution (in-app advertising like it’s used in mobile games/apps, overlay ads, loading screen ads, etc.) would most likely repel the adult heavy user segment, but it might still work for the lower-end, more casual segments that Stadia seems to be targeted at. In any case, having full support from Google means that Stadia will be able to persist for quite some time even if its revenues don’t cover its expenses, so some business model adjusting can be expected.
Speaking of P&L, the fact that Google is behind Stadia is actually a huge pro point. Yes, many have commented on how Stadia will just be another in Google’s collection of failed products, for example Google Glass, Google Wave, or perhaps most infamously, Google+. I would argue that this is one of Google’s strong points in this case, since they obviously have the resources to develop and then maintain a number of products to see which one will stick. They don’t keep all of their eggs in one basket, but instead distribute the risk associated with launching new products in a similar way venture capital does. I won’t get into whether or not that is a good strategy for a software/data company at this point, but I don’t think it necessarily forecasts failure for Stadia per se.
There’s another plus that stems from Google’s approach to product management: if game developers know that they can expect Stadia to be around for at least the next, say, 5 years, that gives them additional incentive to bring their games to the new platform, perhaps even exclusively. In order for Stadia to have at least some hope of long-term viability, they will need to secure favorable partnerships with devs and publishers early on to attract initial users and fuel their growth cycle (more players -> more games -> more players, etc.). If they manage to pull that off (and of course, if Stadia actually delivers on its promises from a technological perspective), they just might have a chance to establish themselves as a worthy competitor in the video games industry.
Stadia has burst onto the gaming stage with a big bang, and several media covering the announcement have expressed enthusiasm for the upcoming service. So, will Stadia bring “huge innovations for multiplayer gaming” as it promises?
Personally, I feel that Google could be a little bit out of their league here. The video game platform industry is a notoriously competitive oligopoly that has brought many once successful companies down or out of the console business — Sega, Atari, Commodore, and NEC, to name a few. Google isn’t even the first Big Four corporation to delve into gaming: Apple had tried to enter the market in 1996 with the Pippin, a console that failed so spectacularly, only 42.000 consoles were ever sold.
On the other hand, Microsoft had successfully entered the market with the first Xbox console in 2001, seemingly rising from the ashes of the Sega Dreamcast. But why was Xbox successful where other, more experienced console manufacturers failed? Well, Microsoft entered the market quite late in the generation, four years after the doomed Dreamcast. The Xbox was also technologically advanced in comparison with its leading competitors, Sony’s PlayStation 2 and Nintendo’s GameCube: it was the first to feature an internal hard drive in the place of cartridges or memory cards, and also came Internet-ready with an Ethernet port which came in handy when Microsoft launched its Xbox LIVE service in November 2002. Xbox LIVE was not the first online multiplayer and media delivery service, as that had been pioneered by the Dreamcast’s SegaNet/Dreamarena service, but since those had been discontinued by 2001 (2003 for the European Dreamarena), it was as good as a blue ocean for the Xbox. In short, you could say the stars aligned for Microsoft as they really were able to deliver what was then the future of console gaming.
Fast forward 18 years to today. Once again, a tech giant is poised to enter the video game platform business and deliver the future of multiplayer gaming. Potential technological/technical issues aside (if the technology is flawed, nothing else will help), as an economist and marketing professional, I can’t help but feel skeptical about the Stadia’s product-market fit. Issues regarding the target consumer, the unclear business model, and promises to fix problems that don’t need fixing (eg. the couch co-op) point to a fundamental misunderstanding of the video game market. Even before launching the Xbox, Microsoft had already collaborated as publisher with game development studios to several successful PC games (think Ensemble Studios’ Age of Empires) and went on to acquire well-known and beloved studios like Rare and Bungie. Most of Google’s experience with video games comes from mobile games published through the Play Store, which is a completely different business from full-fledged, AAA games like the Assassin’s Creed series shown in the demo.
To sum up, while Stadia does show some potential, there are significant internal weaknesses as well as external threats associated with it. I think the most probable scenario is that Stadia will have a big launch (with a lot of hyped-up press surrounding it), but that its performance post-launch will be below expectations. Even if all of the tech checks out, the marketing side remains under question, and if Google doesn’t prepare and deliver a strong marketing strategy, they could be in for a backlash.
Anyway, those are my musings on the subject of Stadia. I’m sure many will disagree, and I’d love to hear your take on it. So go ahead and drop me a comment below!