Google hijacks the $180 billion gaming industry

Stadia, Google's Gaming-as-a-Service platform, is a legitimate threat to large parts of the video gaming industry.

Read time 6min 00sec
James Francis.
James Francis.

Earlier this week Google employees took to the stage at the annual Game Developers Conference (GDC), historically the place to gain support among the people who create video games. Microsoft set this trend when it used GDC to launch the Xbox, then a total upstart and unlikely competitor to Sony's unassailable Playstation platform.

That announcement resulted in a radical change to the console and ultimately video gaming market. Google's revelation could be even more tectonic. If - and I'll get to that later - they can pull it off, it could be the end of the video game industry as we know it

Google's plan

Google's attempt to take over video games is called Stadia. At face value, it's a streaming service. Players log in from any machine with a sufficient broadband connection. They can then play the game locally, but all of the actual processing is being done in Google's mighty datacentre empire. These visuals are streamed to the player, whose responding actions are sent back to the service. If it happens at a low-enough latency, the experience should rival that of playing a game on a local machine. It's essentially gaming as a web service.

The advantage Google has here is its global network. A map shown during the conference announcements reveal points of presence across the world, including South Africa, and Google mentioned edge networking technologies at play here. It is not outside of the realm of possibility that this might be a viable service even for people on lower speed connections, at least fixed-line ones such as ADSL. Much more doubtful is if such a service could ever work on the uneven latencies of mobile broadband other than 5G.

There is no need to download a game nor are there client-side operating system limitation. Stadia will be cross-platform in the way Netflix is cross-platform. Providing a device can run the Stadia platform - presumably an app or browser portal - it should be able to play the game presuming it was designed for that platform. Realistically a PC action game won't suddenly play seamlessly on a mobile device. But such seamless crossovers are now feasible and something Google highlighted.

Game over?

Other than the development studios creating games and the publisher funding them, Stadia threatens just about every other part of the gaming world.

Google will run the games on its servers. That means that the customer machines will not need specialised hardware such as graphics cards or large amounts of memory. One of the machines at the GDC demo intentionally had the lowest specifications they could find. It also means bespoke consoles are redundant and Stadia voids the need for games on mobile app stores.

This is Gaming-as-a-Service. You won't need the hardware, the downloads or to overcome any of the expensive barriers that kept many at bay from video games. The service will be able to facilitate everything from a single player to online massive multiplayer to playing four people on the same TV. It will go beyond that, using the massive scale of the Google network to add unmatched processing and bandwidth to game development. And it already has started attracting the crucial ingredient to any successful gaming takeover: developer support.

That Stadia appears to have and, providing it's easy to develop for, Stadia can quickly expand to offer original and exclusive game content. Everyone outside the developer/publisher ecosystem - hardware sellers, console makers, mobile app stores, distributors, retailers - will be cut out of the loop.

In what seems a little savage for how it cuts off the competition, Stadia makes it very easy to stream onto Youtube and hasn't announced any support for services such as Twitch. Considering some of the biggest Youtube stars are gamers, this is a cop in its own right.

Difficulty settings

Stadia is not the first attempt to stream gaming in this fashion, but nothing before it had remotely the skills, money and infrastructure. If Google is even partially successful, this will cause ripples in the market. What could hamper it?

There is the question of how reluctant the market will be. Some great gaming ambitions have failed from lacking the gaming industry's backing. Stadia supports common gaming development standards that will be attractive to many developers, while its deep pockets can buy many powerful friends such as key publishers. It is already clearly comfortable with the likes of Ubisoft and Bethesda.

But that's not nearly enough, nor cheap: Games can retail for $60 a copy in the US and over R1,000 locally. That's a lot of publishers stand to lose if they don't get a good cut.

Streaming requires serious scale combined with top-line offerings to be successful, let alone profitable. Netflix is currently in a perpetual loop of earn-and-spend as it pays lavishly both for distribution rights and making its own content, all to keep growing its business with subscribers and reduce churn.

Stadia will have the same issue: a never-ending race for content and performance that swells its user ranks. Video games can comfortably cost as much as a blockbuster movie to make, yet subscription rates should be kept low to be attractive. This may be a very low-margin business for Google and take years to realise a good profit. It will be interesting to see how Google reports Stadia numbers.

Performance is also key. Games operate in real-time and a good user experience is arguably the most important element to any successful game. While some games are suited for possible delays, many popular titles require highly reactive control. Even Netflix can suffer a few swirling buffer circles upon its viewers. Stadia won't be afforded the same.

Finally, for all of its computational girth, what Google is tackling here is not small. Video games at scale will be a terrific challenge for their operations. It will consume a lot of their resources and ensuring local network performance will be absolutely critical. It reminds me of a Richard Branson joke I often retell: How do you become a millionaire? Be a billionaire and buy an airline.

Maybe Stadia will be Google's airline: a massive land grab that, though smart, could also be dreadfully expensive. But what Stadia represents is sufficient to blow the tyres out of the current $180 billion video game industry, including mobile games. Not just stores or just hardware makers, but all of it.

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