Why Google Stadia Stalled in Cloud Gaming Race (Subscriber Extra)

Stadia controller in a trash can
Illustration: VIP+; Adobe Stock

Despite being a niche and developing sector within the near-$200 billion global video games market, cloud gaming continues to show promise.

As streaming tech improves, analysts forecast gaming in the cloud will rise to more than $6 billion worldwide by 2024. While this would still make it a very small slice of the gaming ecosystem, that still represents an expected tripling of its value from 2021.

But count Google out.

At the end of September, Google announced that it plans to shutter its Stadia streaming service after just three years on the market.

Intended as a cheaper buy-in to gaming than consoles from Nintendo, PlayStation and Xbox, Stadia relied on the cloud and additional accessories to get a more casual gaming audience set up to game on a variety of devices. After buying the initial equipment, customers would then pick from a selection of subscription plans to access a catalog of streaming games and pay for additional titles to add to their Stadia libraries.

In January 2023, this all goes away. Google has said it will issue refunds to customers, and third-party partners are already figuring out how Stadia gamers can transfer their saved data to other platforms.

Google had already closed Stadia Games and Entertainment, its internal first-party development studio, in February 2021, signaling that Google’s entrance into gaming wasn’t going so smoothly. However, many companies were still developing games for Stadia and found out about its impending closure after the public announcement, making the situation messy as it isn’t clear if the companies will be reimbursed for the revenues they would have made on the Stadia store.

Likewise, at least two significant game releases in 2022, 2K’s “The Quarry” and Squanch Games’ “High on Life” from “Rick and Morty” co-creator Justin Roiland, were intended to be second-party Stadia exclusives before being forced to figure out new distribution plans after Stadia scaled back its gaming operation.

Ultimately, Google just couldn’t gain traction in the shadow of more established gaming entities and their own approaches to cloud gaming.

Google hoped to streamline an easy entry point into gaming by offering a cloud option separate from what was available through existing and expensive hardware, but it wasn’t long before cloud gaming was fleshed out elsewhere.

Nvidia fully launched its GeForce Now service a few months after Stadia, providing PC gamers a way to access their existing game libraries in the cloud at no additional cost beyond the base subscription. Later in 2020, Microsoft rolled out its cloud gaming option within its wider Xbox Game Pass subscription, making it an additional feature for its highest tier. Sony would eventually fold its preexisting PlayStation Now service into a revamped PlayStation Plus in 2022 to better align with Xbox’s strategy.

Sony’s own issues with cloud gaming that predated Stadia’s launch should have been a warning sign that drawing gamers to the cloud was easier said than done. Originally launched in 2014, Now struggled to attract interest and didn’t even enable downloads of games in its library until four years later. By that time, Game Pass had been on the market for a year as a download-only subscription service that achieved rapid success, forcing Sony to re-think its pure cloud approach to Now. The last reported subscriber numbers for Now were 3.2 million in 2021 vs. 25 million for Game Pass at the start of 2022.

Like GeForce, neither of the console cloud options require the individual purchase of games on the cloud. And while Amazon’s Luna cloud gaming service fully launched in 2021 and has been most similar to Google’s approach, it still sports a fully operational internal studio that generated a hit in 2021’s “New World.”

Additionally, Luna offers a selection of rotating free games for Prime members alongside full integration with Twitch, the livestreaming service it owns that has regularly pulled in far more viewers than YouTube, which is owned by Google, showing that Luna still benefits from more visible integration into both a larger gaming operation and subscription regime under Amazon.

Beyond actual cloud gaming competitors, the heightening of the handheld console market in 2022 also didn’t bode well for Stadia’s prospects.

While many people own smartphones and can stream games through them via a Stadia subscription, the release of Valve’s Steam Deck proved immediately popular with PC gamers, granting them a way to transfer their Steam games to a portable device with substantially better graphics and performance than anything playable on a smartphone. Steam Decks are priced at $400 as well and were subsequently sold for exorbitant prices on eBay, showing just how popular of a product it is despite the expensive entry point.

In addition to Steam Deck, Logitech has also put out a handheld device that is compatible with cloud gaming for both Xbox and GeForce Now subscribers.

If Google intended to keep Stadia running, it would do so at time when the market is already flooded with improved accessibility to games meeting the specific accessibility and tech requirements for gamers’ differing tastes and methods of play.

Strangely, Google operates one of the two main storefronts for mobile games alongside Apple, where it makes a fortune from entirely voluntary in-game purchases on games that are otherwise free to play.

Accessibility was the key to $47 billion in Google Play revenue in 2021, making it hard to see where the confidence in charging Stadia customers for individual games came from after successfully launching the service on devices big and small.

That said, if Google wasn’t willing to continue paying large sums to developers to develop games exclusively for the platform, there would have been little chance of continuing to entice third-party partners to release games on the service without the promise of actual sales to customers.

Video games may be worth $200 billion, but the market remains as difficult as ever for new entrants to pierce.

For further data and analysis, check out Variety Intelligence Platform’s second edition of “Level Up,” its special report on the video games space.