Would a Google Stadia subscription service be bad news for the industry?

Analysts discuss Stadia's potential to drive "a major downward trend" on prices, and what subscriptions mean for developers and diversity of games

The unveiling of Google Stadia this week was the answer to perhaps the biggest question leading into GDC. However, as the team discussed in a subsequent Roundtable article, the hour-long presentation skirted around drier -- but utterly essential -- points like how fast an internet connection it will require, and how much it will cost for developers and, most importantly, consumers.

In conversation with some of the industry's most prominent analysts, the subject of business model was at the very forefront of the debate -- and many of those we talked to identified subscription as an obvious choice for Google Stadia.

"If it's not on a subscription basis I'll be shocked," admitted Lewis Ward, research director for gaming at IDC. "All of the similar services to date have certainly moved in this direction over time, including PlayStation Now."

Ward continued: "[The price of Stadia] will be put in the context, whether Google likes it or not, of what gamers are currently paying for the gaming experiences they enjoy. If Stadia costs more I think it will face an uphill battle to take market share from how the market works today."

"If it's not on a subscription basis I'll be shocked"

Lewis Ward, IDC

The task of convincing gamers to migrate their "game-related spending" from existing platforms to Stadia could be slow regardless. The link with YouTubers and content creators may help to speed up the process, but Ward expects it to be "at least 2021" before Google's platform has an audience in the tens of millions.

"I think this is a long-term play, and we've just witnessed Google jump in with both feet," he said.

For David Cole, founder and CEO of DFC Intelligence, Google's key advantage over the companies already active in game streaming is its scale and its cloud network -- but the product itself, "[doesn't] seem to be doing anything that different."

"I don't think this is an immediate game changer," Cole said. "It will be a drawn out battle among multiple competitors. Nothing major came out today."

Again, a big issue for Google to solve is the business model. While a subscription service is the most widely discussed possibility, Cole insisted that, "[in] the long run you still want consumers paying top dollar for AAA games. Ideally, the streaming service would act as bait to get them [customers] on board."

Does the spread of cloud streaming pose a threat to the $60 AAA game?

Does the spread of cloud streaming pose a threat to the $60 AAA game?

This is the point at which Google's presentation and the reality of the games business collide. The game used to demonstrate Stadia to the world was Ubisoft's Assassin's Creed Odyssey, and yet this is exactly the kind of AAA release that would not make sense as a part of a subscription service -- the kind of game that, as Cole stated, "you still want consumers paying top dollar for."

Nevertheless, technology that offers instant, fluid gaming with minimal hardware requirements will undermine the value of AAA games by its very existence.

"This type of technology -- and not just from Google -- could have a major downward trend on prices, which could really impact what the large video game publishers are able to charge for their games," Cole said. "This has many investors concerned, because the ability to get consumers to pay big money for access to games has been the key reason to success for the large publishers. Streaming services threaten to disrupt that equation."

"While I would expect it to be successful, it would drive to a loss of diversity on the game experiences we have currently available"

Thomas Bidaux, ICO Partners

ICO Partners CEO Thomas Bidaux also noted that "everybody is mentioning a form of subscription" as the likely business model for Stadia. His issues with that outcome, however, go beyond price and into the kind of games that are likely to thrive within that structure.

"I really hope Google stays away from an all-you-can eat offering," Bidaux said. "In the past, this type of model, with a revenue share based on time played, has driven very specific games to be profitable, pushing away game experiences that are not driving long hours of gameplay.

"While I would expect it to be financially successful, it would drive to a loss of diversity on the game experiences we have currently available."

Microsoft CEO Satya Nadella has admitted that the phrase "Netflix for games" is used as internal shorthand for what Project xCloud aims to achieve -- though, admittedly, it's not clear how precise that comparison will actually prove to be. Nevertheless, our own Brendan Sinclair has voiced concerns about the negative consequences that buffet-style model could have for developers.

On that point, Bidaux was in full agreement: Hopefully, we will see more of a combination of free-to-play games, premium games, and maybe an offering similar to the Game Pass or the PlayStation Plus, rather than the dreaded (by me) all-you-can-eat Netflix-style subscription."

Google will need content to differentiate Stadia from existing options in the market

Google will need content to differentiate Stadia from existing options in the market

Joost van Dreunen, vice president of the Nielsen-owned SuperData, declared the reveal of Google Stadia "a key milestone in the industry's history" -- partly due to the huge investment a company the size of Google has made in gaming, but also because it offered a clear view of a purely digital future for the industry.

And like Bidaux, his main concern was less price and more content; specifically, how Google intends to differentiate its platform from existing options through games. Stadia Games and Entertainment, the Google first-party studio led by Jade Raymond, is a partial response to this point, but a single entity would have to be hugely productive to create or source enough unique and exclusive content.

"The new platform contenders are the type of firms whose interests do not historically align with those of game makers"

Joost van Dreunen, SuperData

"Porting well-known titles and franchises is an obvious first step, and the integration with YouTube is novel, to be sure," he said. "However, to claim a meaningful share of the market, Google will have to acquire exclusive content that will draw consumers to its offering, and that's precisely the missing component currently.

"Just because the console is in the cloud now does not mean that this part of the industry's economics have changed."

In his summation of the broad future that Stadia points toward, van Dreunen offered two perspectives, the first of them utopian: "As cloud gaming delivers on its promise of facilitating play of any high quality game on any device, the market will grow. We already see the positive benefits this has had for music and video."

But there is a dystopian view, and it is again tied to the subscription model that lends itself so well to streaming technology.

"The dystopian point-of-view states that content creators will be reduced to a cost-plus line item in a subscription-model that only values them for the increase in subscriber count they provide," van Dreunen said.

"Because this is very much a 'tech play', some of the new platform contenders are the type of firms whose interests do not historically align with those of game makers, especially when compared to incumbents like Nintendo, Microsoft and Sony.

"I suspect that there'll be an abundance of mediocrity as small- and medium-sized game companies flood the new platforms in the hope of capturing market share. The big guys will likely wait and watch how this plays out before they expose their carefully crafted IP to the whims of a new breed of platform holders that has no obvious interest in their success.

"But I really want to be wrong about this."

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Latest comments (5)

Bob Johnson Studying graphics design, Northern Arizona UniversityA year ago
has google really invested much in this?

I mean if it doesn't work out it just seems like they can easily put the part of their data centers allocated to gaming to use in the main business.

In the end it's the price and experience that will determine its fate. I have no idea what pricepoint they can come in with. I don't know the games they will have. Will it be old games? Newest releases. Some of each? And then what will the experience be like? That's one of the main problems to me. I'm skeptical it will be good enough. And surely it's going to be a highly variable experience. One person might say it works pretty well while another will shake their head no. Compare that to buying a console where every one has pretty much the exact same quality of experience and they continue to have the same quality of experience day in and day out.

Edited 1 times. Last edit by Bob Johnson on 21st March 2019 4:18pm

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Sean Slavik Chief Executive Officer, Chance6 Studios, LLCA year ago
I suspect, and of course I can't be certain, that this might not be the tech you're looking for.

One of the projects my company toyed with was streaming games, especially indie games. The problem we ran into was the state of technology: namely, that we could host dozens of streaming gamers... so long as the game had a system requirement akin to a PS1. Once it got anywhere close to modern specs, the technology dropped to 1-2 players per instance, and the cost to host didn't allow us any wiggle room to even begin to subsidize the actual games.

Sure, Google has massive data centers, and their cost to host 1 additional user is negligible, but frankly it begs the question of why Amazon or Microsoft, with their massive, instantiating data centers aren't announcing similar projects, or why nVidia's own project hasn't significantly scaled?

I do believe streaming will inevitably be a major component of future game distribution, and I anticipate Google, Amazon, Microsoft, AMD, and nVidia will all be at the forefront of it. That said, I believe that even if the technology proves capable in the next 2-3 years, we'll be looking 5-10 years beyond that for mainstream adoption, especially if that adoption requires buying into a new system/pseudo-console (i.e. not PC or mobile driven; consider Ouya, Razer, etc.).
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Eyal Teler Programmer A year ago
The lack of information makes this hard to analyse, but just looking at the trial of Assassin's Creed Odyssey and the promise of Doom Eternal, it seems clear that Google is offering something that's enticing to at least some AAA developers. I imagine that these developers know more about the business model than we do, and found whatever incentive Google provided good enough.

One of the early limitations will be the use of Linux. AAA devs tend to stick to Windows, and again, it would take some incentives on Google's side to get them to create Linux versions (and support them). I think that for a start this will be a limiting factor.

So I'd imagine that, first of all, rollout will be slow, with a small number of games, probably with a smaller number of games compared to Microsoft's upcoming service.

That's also the reason I think that Google's effect on the industry will be smaller than Microsoft's. Developers will be required to do work to get on Stadia. If they do that, it's because the terms felt convincing to them. It will be joint work between Google and game publishers to get Stadia running and successful, and that will only happen if publishers agree with the pricing model.

On the other hand, it will be easier for Microsoft to launch such a service and, because it will have quite a bit of content from Microsoft's growing number of studios, even if others don't participate, that will pressure publishers to join for the visibility. I think that Microsoft's offering will have a much higher effect on the industry, and a much higher chance of a negative effect, at least initially.
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Show all comments (5)
Klaus Preisinger Freelance Writing A year ago
AAA publishers are very similar to big Hollywood studios. The 200 million Dollar movie, with the 200 million marketing budget which is expected to make one billion Dollar box office and then some later down the chain. Which way is the movie going to be sold? Answer, all of them. Pay per view at the cinema, pay per screen through Amazon, buy to own BluRays, license to streaming services and TV stations world wide, put on your own network and sell ads. This is very much what we see from big game publishers. The $60 game with the season pass, the DLC, the lootboxes, and all the other monetization methods. Hollywood and AAA game publishing agree on one thing: the value of a product is found in the amount of profit it can generate. It is the Activision mantra, double down on one game that makes four times the profit, instead of making many games.

However, this is not Netflix. A TV show on Netflix cannot be measured by the amount of profit it generates, because the relationship is anything but direct and immediate. In contrast to Hollywood or AAA game development, the perfect studio is not the one which can turn a $100 million project into a billion Dollars worth of revenue. Netflix will not aim for the big blockbuster movies, they churn out volume, volume and more volume, $18 billions worth of it per year. Netflix is a service, consistent quality and quantity and consumers moving from product to product are key. Which is also the antithesis of gaming, where publishers seek to lock down consumers into that one game they play, preferably excessively and nothing else to keep monetizing. It is like expecting people to watch Avengers in cinemas, rent it on iTunes, buy the BluRay, watch it on Disney+ and tune in for the Free-TV premiere.

Netflix makes a lot of money, so trying to make "Netflix, but..." is the buzzword to sling. Are any of the services that? No. At the moment, they are one more way for publishers to make money. But remember, Netflix is not Netflix because they redistribute other people's content, they are Netflix because they are filled to the brim with their own stuff and they have an audience that is always looking forward to that next show they will get.

The Netflix of games will not be whoever bundles a bunch of old games and a few exclusives into a subscription first. It will be the company that approaches content creation the way Netflix does. 700 TV shows and 90 movies per year, relentlessly financed and put on the service. Imagine you had 90 studios like Ninja Theory and all of them knew that if they made a $15 million game similar to Hellblade, then there would be a service that just buys the game wholesale, keeps your doors open and you work on the next. And those 90 Hellblade games would not even be 10% of the Netflix budget! Netflix is not in it for the profit at this point, they are in it for the market share and they will relentlessly spend the money they generate.

This is not the way video games publishing works, which is an industry deeply entrenched in making profit, each publisher in their own niche. Google did not give the impression they were to become the ones to change that. For that reason, an imaginary game that just will not come together is in my hyperbolic opinion more likely to be able to sell the cinematics they made to Netflix, than to get somebody to pick up the game. This is the reason why there is no Netflix of games. Just because somebody charges $12 per month, does not make them one bit like Netflix.
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Nicolas Wartelle-Mathieu Level Designer - Grade 2, Playground GamesA year ago
I agree with Thomas Bidaux that time-based revenue would not be a good solution for developers.
"X players spend Y hours on game A, developers get N dollars."
It would basically be a Spotify model, one which is garbage for small artists.

And with this, I agree with what is said about a loss of diversity. Because no one would have any (economic) interest in making short experience like Hellblade, What Remains of Edith Finch, Florence and the like. Which would be, pardon my language, a fucking shame.

Also, Stadia looks like an ecological disaster, but no one seems to care because Google pretends they're producing green energy. So I guess we'll continue not to give a fuck about that...
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