Analysis: The impact of Google Stadia shutdown on Amazon, Xbox, and other cloud gaming initiatives

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With its Stadia service, Google tried to make an early break into cloud-based video game publishing and development, but an incomplete launch product and poor sales model brought it down almost as soon as it started.

Now, as Google announces Stadia’s imminent shutdown, it’s departing from a cloud gaming market that’s primarily been built as a reaction to it. Stadia got there first, but Amazon, Microsoft, Sony, and others have capitalized on Stadia’s weaknesses.

In 2022, cloud gaming is increasingly popular and affordable — thanks in part to learning from what Stadia did wrong.

Google announced Thursday that it would sunset Stadia. Stadia’s various storefronts have already been shut down, but users can continue to play games that are already in their Stadia library until the service officially goes down Jan. 18.

“…While Stadia’s approach to streaming games for consumers was built on a strong technology foundation, it hasn’t gained the traction with users that we expected,” wrote Phil Harrison, Google vice president and Stadia’s general manager.

“We remain deeply committed to gaming,” Harrison continued, “and we will continue to invest in new tools, technologies and platforms that power the success of developers, industry partners, cloud customers and creators.”

Stadia’s current team members will be reassigned, while the service’s underlying technologies will be repurposed for use on YouTube, Google Play, and augmented/mixed reality projects. Users who bought Stadia games and hardware via the Google or Stadia stores will be refunded their money over the course of the next few months.

Google initially announced Stadia during the Game Developers’ Conference in San Francisco in 2019. Via Stadia, Google claimed, it would allow users to play video games via almost any networked device, via cloud access to Google’s servers.

The pitch to consumers was that you don’t have to spend thousands on high-end consoles or PCs to play video games when you can log into Stadia via your current tablet or phone and run the newest Assassin’s Creed on maximum settings.

Further, Google had already made substantial investments that indicated it planned to become a major player in mainstream games publishing and development. This included opening two game studios in Los Angeles and Montreal, and hiring industry veterans like Harrison, who worked at Sony, Atari, and Microsoft before coming to Google, and former Ubisoft producer Jade Raymond.

The hype was real for most of the following year, but when Stadia launched in Nov. 2019, it did so with incomplete software and with a genuinely bizarre sales model. Google’s vision for Stadia was clearly that it was meant to be a sort of virtual console, to the extent where it charged users full retail price for its cloud versions of individual games.

Stadia subsequently struggled to find an audience. Despite the massive growth in video games’ popularity over the course of 2020, Google opened 2021 by scaling back its expectations from the Stadia project. It abruptly shuttered its internal development studios and shifted Stadia to effectively being a low-overhead games publishing service.

Conversely, other companies’ cloud-gaming ventures have focused on lowering consumer costs. Amazon’s Luna, for example, was first announced a few months after Stadia, and was visibly made as a reaction to it. Instead of charging users for individual games, Luna offers a single monthly fee for unlimited access to a library of titles, with additional features like a Couch mode for online multiplayer or extra themed “channels” of games for an additional fee.

Similarly, Microsoft has used its Xbox Cloud Gaming initiative as a value addition to its Xbox Game Pass, rather than a standalone service. You can subscribe to Game Pass on the Ultimate tier to have the option of playing games via the cloud on console, PC, or supported mobile devices. It’s just one more value add-on a subscription that’s already packed pretty fat.

Sony got into the act earlier this year when it rolled together its two subscription services into a single option, the rebranded PlayStation Plus, which includes an expanded version of Sony’s cloud services as a bonus for higher subscription tiers. This includes using cloud technology to effectively emulate the PlayStation 3, which is otherwise notoriously difficult, for the purpose of streaming games from its library.

Analysts have released data from as recently as this week that suggests enthusiasm for cloud gaming is slowly growing in the American market. Research firm Parks Associates released a report Monday morning showing that at least 35 million American households would be interested in picking up a cloud gaming service at a roughly $9.99/month price point.

The overwhelming impact of Stadia, then, appears to have been as a negative example. While playing games on Stadia is a decent experience at this point as long as you’ve got a stable high-speed internet connection (source: me, playing Red Dead Redemption 2 on Stadia this morning), no one else in the cloud-gaming space has gotten anywhere near its sales model.

Users could only buy individual games on Stadia for their standard retail price, or play them for free for short periods of time as a demo. Stadia wanted to charge full MSRP for what amounts to conditional server access, which could theoretically be yanked at any time due to a contract expiration or licensing conflict. There was no streaming equivalent, such as Xbox Game Pass or PlayStation Plus.

This includes the relative handful of Stadia exclusives, which will effectively go off the market completely when Stadia shuts down until or unless their publishers post them to other platforms. This includes Tequilaworks’ Gylt, tinyBuild’s Hello Engineer, Qgames’ Pixeljunk Raiders, Bandai Namco’s PAC-MAN Mega Tunnel Battle, and Splash Damage’s Outcasters, the latter of which only came out last July.

(It’s difficult to not draw a parallel here between Stadia and the current HBO Max controversy, where new corporate leadership has memory-holed multiple seasons of animated programming, allegedly to get a tax write-off. Physical media and local installation both have their drawbacks, but neither will abruptly cease to exist due to sudden corporate whim.)

Analysts have been expecting Stadia to be dispatched to the “Google graveyard” for at least the last year, but Harrison’s announcement was still quite sudden. As Stadia winds down, the final word on its efforts in cloud gaming appears to have been that it went first, so it got to make all the first big mistakes.

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