Cloud Gaming Ramping Up with Google Stadia and Wide-Reaching, Multi-Market Impact

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1Q 2019 | IN-5444

Google announced its cloud gaming platform, Stadia, at the 2019 Game Developers Conference (GDC). Building off its Project Stream trial in October 2018 (in which Assassin’s Creed Odyssey from Ubisoft ran on Google’s platform at 1080p and 60fps), Google will launch its service in 2019, initially to the United States, Canada, the United Kingdom, and other European markets. Stadia will naturally run on Google Cloud and is powered by GPUs from AMD (AMD’s stock, not surprisingly, received a boost due to the news). The platform will enable up to 4K gaming with HDR at 60 fps, a substantial upgrade from the Project Stream trial and over current generation consoles—Stadia supports up to 10.7 teraflops of processing power, compared to 6 teraflops in the Xbox One X and 4.2 teraflops in the PS4 Pro. Other data center PC specs include custom x86 CPUs, at 2.7 GHz and 16 GB of RAM, running on Linux. Stadia will also benefit from elastic compute power within the cloud (e.g., stacking additional hardware for things like physics calculations, split screen, etc.) and will reportedly allow games to start within five seconds. Google also announced a Stadia controller (using Wi-Fi) that includes a button to access Google Assistant (e.g., if a gamer gets stuck in a particular place within the game, Google Assistant can show video walkthroughs from YouTube) and sharing features (to share in-game achievements to social networks and video).

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Google Announcest Stadia and NVIDIA Brings Hardware and GeForce Now News

NEWS


Google announced its cloud gaming platform, Stadia, at the 2019 Game Developers Conference (GDC). Building off its Project Stream trial in October 2018 (in which Assassin’s Creed Odyssey from Ubisoft ran on Google’s platform at 1080p and 60fps), Google will launch its service in 2019, initially to the United States, Canada, the United Kingdom, and other European markets. Stadia will naturally run on Google Cloud and is powered by GPUs from AMD (AMD’s stock, not surprisingly, received a boost due to the news). The platform will enable up to 4K gaming with HDR at 60 fps, a substantial upgrade from the Project Stream trial and over current generation consoles—Stadia supports up to 10.7 teraflops of processing power, compared to 6 teraflops in the Xbox One X and 4.2 teraflops in the PS4 Pro. Other data center PC specs include custom x86 CPUs, at 2.7 GHz and 16 GB of RAM, running on Linux. Stadia will also benefit from elastic compute power within the cloud (e.g., stacking additional hardware for things like physics calculations, split screen, etc.) and will reportedly allow games to start within five seconds. Google also announced a Stadia controller (using Wi-Fi) that includes a button to access Google Assistant (e.g., if a gamer gets stuck in a particular place within the game, Google Assistant can show video walkthroughs from YouTube) and sharing features (to share in-game achievements to social networks and video).

Stadia will reportedly run on most devices that support the Chrome browser (although Google will focus on Pixel devices to start); TVs will require Google’s Chromecast and Stadia controller to operate, while other devices will be able to use supported third-party controllers in addition to the Stadia controller. Additional information is expected during the summer, but the platform is expected to launch in 2019. Although pricing hasn’t been announced, a pricing model is reportedly already mostly sorted out internally.

NVIDIA also released some news around cloud gaming, highlighting a powerful RTX server pod with up to 1,280 Turing GPUs (32 RTX Blade servers with 40 GPUs/server). NVIDIA is also looking at 5G-enabled cloud VR applications. The company’s GeForce Now cloud gaming service (in beta) was announced to currently have 300,000 users and one million more on a waiting list to join the beta program. NVIDIA will also upgrade the data center hardware powering the service to enable higher frame rates and 4K.   

The Dawn of the Cloud Gaming Revolution...or Is it?

IMPACT


Game companies like Ubisoft have voiced strong support and expectations for cloud gaming, and EA is working on its cloud gaming platform, Project Atlas (in part fueled by EA’s acquisition of GameFly’s cloud gaming technology and personnel). On the console side, Sony has invested (by acquiring Gaikai and Onlive) in and launched a cloud gaming service (PlayStation Now), and Microsoft is working on a cloud gaming service (xCloud). With Google (Google Cloud) and Microsoft (Azure) onboard, it isn’t a leap of the imagination to expect Amazon (AWS) to round out the cloud players to be working on cloud gaming, and reports suggest this is indeed the case. Recent rumors also suggest Walmart is considering a cloud gaming service. So, while there is certainly strong momentum (along with belief in the future of cloud gaming) within the gaming industry, there are certainly reasons to tap the brakes, as it were, before sprinting to the finish line.

There have been previous cloud gaming cycles that have been undone by poor performance and, in truth, a market that wasn’t ready to go purely digital. For example, just over five years ago, before the launch of this current console generation, gamers expressed strong concerns (read: nearly revolted) at the notion of an online-only console and strongly praised the virtues of physical copies. A lot has changed in the last five years, though. Gaming as a service/platform is certainly a business model that is conducive to a cloud gaming distribution system, but latency could still be an issue. Journalists who trialed Stadia following Google’s announcement reported lag/latency in certain titles like first person shooters—this would not bode well for some of the battle royale type games currently in vogue or certain multiplayer titles where these issues are accentuated. Google, however, is confident latency will not be an issue with Stadia as long as users’ Internet service and connection meet stated requirements. On that note, consistent and reliable connections are essential and, while this facet of the video market has improved, issues still crop up from time to time while viewing streaming media. For typical video feeds this might temporarily drop quality or stop the content briefly for buffering, which may be a nuisance but isn’t typically a deal breaker, but it would very likely be viewed more harshly in the gaming market. Stadia will reportedly require 30 Mbps to stream 4K gaming (25 Mbps recommended for 1080p at 60fps), which could be problematic for a number of users (no word yet on what bitrates/quality would be supported below 1080p). Other issues, like content availability, could also hinder any new upstarts.

Fragmentation in the console and PC markets has declined markedly in the past half-decade following the adoption of PC-centric hardware by Sony and Microsoft for their respective console platforms. This has engendered more cross-platform play, and exclusive titles have been mostly limited to first-party developers within Microsoft, Sony, and Nintendo (Microsoft, though, views Windows/PC as part of its Xbox ecosystem). Cloud gaming platforms could lead to increased levels of fragmentation. Google announced Stadia Games and Entertainment as a first-party game studio and, while this alone is not noteworthy (all of the gaming platforms have first-party developers), the economics of cloud gaming could push platform operators to heavily favor first-party titles. With games increasingly representing a stream of revenues (as opposed to one-time purchases), those titles that are developed in-house could better allay the costs associated with cloud gaming. Similar developments are occurring in the video streaming market as companies like Netflix are doubling down on original programming and potentially moving away from content from competitive services (e.g. dropping Disney’s Marvel series). The same could happen in the cloud gaming market, where companies like EA could keep titles off of other cloud gaming services.

Despite these potential flags and hurdles, there are some positive new developments to consider. Stadia’s integration with YouTube for sharing and “crowd play” could prove significant for the social and competitive aspects of the gaming market. YouTube and Twitch are already leading video sites for gaming—Google announced that over 200 million viewers per day watch gaming on YouTube, consuming over 50 billion hours in 2018. Live-streaming could gain considerable mindshare among YouTube viewers if there are additional opportunities to play with (or against) their favorite YouTube personalities. This could also create new points of engagement and marketing for eSports, which is already generating a great deal of attention in the video market. In this regard Amazon best positioned to follow Google’s lead with Twitch and its future cloud gaming endeavors.

For ISPs and MNOs, the increased demands on data consumption, speed, and low latency could create new marketing opportunities and tiers for services. Low latency coupled with the portability of cloud gaming services should also be a boon for 5G services, and companies could market (if not bundle) these cloud services in tandem with new plans—cloud gaming would present real world benefits to 5G today beyond simply serving as a wider data pipe for more mobile video.      

Same Rules ApplyContent, Pricing, and Quality of Service Will Decide Cloud Gaming's Fate

RECOMMENDATIONS


While gamers have embraced the game as a service (GaaS) model, concerns still persist around longevity, or, perhaps better stated, the long-term availability of content they have invested time and/or money into. This is one reason Steam, acting as a repository of one’s own gaming collection, has generated such a strong following. With regards to Stadia, it appears pre-purchased games will not carry or cross over to the new platform—all Stadia games will require a new purchase. This isn’t surprising, but if Stadia doesn’t launch with enough new titles it could run into the same issue the Nintendo Wii U did at launch and offer a range of titles that most core gamers have already played. Since these cloud gaming platforms could reach a myriad of devices without the purchase of dedicated gaming hardware (or high-end PCs), one could surmise that this will push into the casual gaming market as well. This is entirely dependent on the pricing and business models employed by each respective service.

Almost invariably, cloud gaming services will include a subscription model to the platform. This helps even out the costs of running the service, particularly for third-party titles where revenue is shared but the costs of streaming and maintaining hardware remain the same as more lucrative first-party titles. For casual gamers the price of admission alone might be too high when they consider adding it to the already growing list of SVOD services they are collecting. Plus, the core gamers stand to benefit the most from the cloud gaming services (which promise high-end PC/console gaming); casual gamers don’t typically play hardware intensive titles, so they stand to benefit less from high-end gaming servers (the devices and services they currently use likely already satisfy their gaming needs without any need to upgrade). Pricing could take on a usage based model—e.g., “rent” a game for X number of hours for $Y. Demos could also be a big driver, although past cloud gaming services have become too closely associated with demos (since users can try immediately without downloading/installing) that did not result in purchases on the platform (with users instead opting to buy the games demoed elsewhere).

On the positive side, core gamers have shown themselves to be relatively patient (despite being very vocal) when it comes to adopting new technologies and waiting for them to become more fully fleshed out. They also tend to be relatively price-insensitive when it comes to buying into new technologies that resonate with their interests. Companies entering the space should heed Sony’s handling of its PlayStation Now service; the company has remained patient with it and continues to evolve it as the market allows. Google has historically been quick to jump on new technologies but also fast to pull the plug, which could give prospective customers further pause. Where possible, cloud gaming services should ensure there are some avenues for continuity of service or access to titles in the event a cloud platform should cease operations. It’s one thing for a game as a service to end—when it does, there is a finality to it from the gamers’ perspective. It is problematic, however, when a cloud platform ends and, though the games it offered continue on other services/platforms, gamers lose their progress and/or virtual goods. Services and game companies will need to work together to ensure consumers will have continuity regardless of if a platform/service closes shop. This is playing out now with the upcoming cessation of UVVU (UltraViolet), which shouldn’t impact too many users because services like VUDU (or platforms like Movies Anywhere) are maintaining UVVU users’ linked libraries.

For broadband providers and mobile operators cloud gaming represents a prime opportunity to push higher tiers and new technologies, like 5G. Cloud gaming should produce a stronger affinity for these options than other sources of content, like video streaming, particularly among its core demographics. For the companies that have social elements, cloud gaming will engender many new opportunities to enrich existing communities and new experiences and could also bring eSports to an even wider audience.

The gaming market is in transition—there will be a next generation of consoles and PC gamers will still buy high-end gaming rigs, but, like electric/alternative fuel cars and eventually autonomous vehicles, the foundational pieces are already being laid and, in time, the market will transition. This cycle of cloud gaming, coupled with new technologies like 5G, certainly makes it seem like we’re solidly on that path towards this new future and, not surprisingly, like that future will likely be brought on via the efforts of some of the giants in the tech industry.