If you click on a link and make a purchase we may receive a small commission. Read our editorial policy.

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 GamesIndustry.biz 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?

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

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."

Tagged With

Author

Matthew Handrahan avatar

Matthew Handrahan

Editor-in-Chief

Matthew Handrahan joined GamesIndustry in 2011, bringing long-form feature-writing experience to the team as well as a deep understanding of the video game development business. He previously spent more than five years at award-winning magazine gamesTM.

Comments

More Features

Latest Articles