A Rough Launch for Google Stadia Is Not Indicative of the Wider Cloud Gaming Market

Google’s Stadia cloud gaming service launched to the public in late November 2019 to both excitement and confusion. For US$130, customers get the Stadia controller, a Chromecast Ultra (for casting games to a TV), and three months of the Stadia Pro subscription service that enables 4K streaming and some free and discounted game offers. Google is one of the first cloud gaming services to come from a household tech giant name; Sony and nVidia have their own services already, with Xbox and some other notable names launching later. Some lesser known players have been active for a while, including Blacknut, Shadow, and Ubitus. Business models differ between these services, with some offering direct purchase of content within the platform and others allowing streaming for a user’s existing game library when possible. Stadia follows the former model, and is the first to grab significant attention mostly due to Google’s size and sway and the timing of launching early in the cloud gaming hype cycle.

The promise of cloud gaming and services like Stadia is strong: instant access to games, with the highest quality graphics possible, consumable on any device with the proper access (an app, browser, etc.). Stadia takes this idea and integrates it into the Google ecosystem, with some compelling synergy in areas like live streaming and sharing with YouTube. Not requiring a dedicated machine for playing a game, be it a console or a PC, is a boon for the market and promises to open up millions of users to the gaming space who may not have been deeply embedded before.

The launch lineup of games for Stadia is limited, and there hasn’t been enough time for the planned first party development houses to push exclusive content for the service. Additionally, Stadia’s business model makes growing a user base difficult; rather than a subscription service that includes access to all games in the service, Google is operating a storefront model where users must purchase every game (outside of a selection of free titles available). There is a lack of clarity around how many games will ultimately come to the service over time and the timeline in which they will be added.

This means Stadia will likely struggle to find a significant audience with the current Go to Market (GTM). Gamers who are invested in other content platforms—consoles or PC game stores—will be hesitant to buy into another platform with each game purchase. Those who want the latest titles will buy them through traditional means. Those who are not regular gamers are a good fit for Stadia’s business model, but likely don’t have enough interest in gaming in the first place to draw them to it. That leaves a small middle ground of regular game players who want the flexibility of Stadia and don’t care for other means of purchasing and playing games. Mobile gamers could fit into this category, where there is some desire for larger scale games than traditionally offered, but again a mismatch between audience and content, where a mobile gamer normally wants experiences that are quick to consume, is likely.

The issues Stadia is facing are not universal cloud gaming issues, although there are some market dynamics that will universally impact the space. Depending on the region, bandwidth caps are common and can cripple the potential of cloud gaming. Even with conservative bitrate estimates for an average experience, say 10 Mbps, bandwidth can be consumed at a rapid pace. This is especially true as resolutions, framerates, and bitrates are pushed: Stadia’s promise of 4K 60fps content is expected to hover around 35 Mbps. This equates to around 15 gigabytes consumed per hour. Crucially, this is a novel bandwidth consumption as well, adding to a user’s normal content consumption; previously, locally played games had little to no bandwidth requirement outside of connectivity features. Efficiency increases in codecs can help here, although only so much.

Quality of Service (QoS) is another universal challenge. Since the entire experience lies in the cloud, any connectivity issue impacts the entire experience. This can include latency spikes or overall high latency, bitrate fluctuations creating adaptive bitrate and quality changes, or again running into data caps preventing service or creating unforeseen Internet Service Provider (ISP) charges. Google promises advances in latency and overall QoS, but even Google can’t control the connection quality for a user in their home. If the ISP or a Customer Premises Equipment (CPE) device fails or struggles, it kills the cloud gaming session, whereas this would have been only an inconvenience with traditional gaming. 

Still, the appeal of a gaming platform that requires no special hardware and is accessible anywhere with a connection has immense promise. Interest from telcos and other service providers is already significant, with potential for service bundling similar to what’s already been seen with video streaming services and broadband or cellular services. 5G starts to play a role here going forward as well, with some potential tie-ins with the high bandwidth, low latency requirements of cloud gaming fitting nicely with the advantages of the next-generation networks. While network latency is actually a relatively small part of the End-to-End (E2E) latency demands, any objective advantage here can be marketed and potentially valuable.

Momentum is carrying cloud gaming already, and the success or failure of a giant name like Google in the space isn’t actually significant at this stage. While it certainly wouldn’t be a boon for the market if Stadia were to fail, there’s so much activity from other players, both within and without the core gaming companies, that the success of a single service is not indicative of anything larger than that service itself. Going forward, expect to see shifting business models, increasing partnerships, and some unique marketing strategies as companies try to capitalize on some of the objective cloud gaming value available.