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July 16, 2019
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Why Stadia can be the biggest shake of the video games industry in 15 years

by Carlos Peinado on 03/22/19 02:10:00 pm

The following blog post, unless otherwise noted, was written by a member of Gamasutra’s community.
The thoughts and opinions expressed are those of the writer and not Gamasutra or its parent company.

 

After Google’s presentation about Stadia during the last GDC, hundreds of articles have been written discussing its potential features, network requirements and possible problems that can come with it. But I wanted to throw out there a few ideas and opinions about why Google is doing this and what it can imply for the video game industry, of course, all of them might be wrong or right but I think the debate that can generated will create interesting exchanges of ideas.

Distribution

Nobody should be mistaken, Stadia is the most aggressive move we have seen in the game industry since Steam. Just think about how most of us thought Epic’s launch of a Steam’s rival Epic’s Game Store was already an aggressive move a few months ago, and why? Because it provided a 12% cheaper alternative for developers to distribute their games in a system that is familiar to both creators and consumers. Stadia’s proposal is much ambitious because is built on top of each and every open video game distribution platform out there.

Stadia’s proposal is superior than any other distribution platform out there because the platform is transparent to the user, you just need a link and you are right into the game. The less advanced users will greatly enjoy not having to install a program in their PCs, not having to wait for downloads and organize their library. Stadia as a distribution platform has the potential to be ubiquitous on the net, extremely fast to deliver the value (a few seconds are you are in the game) and compatible with billions of already sold devices.

How big is a bite to distribution platforms? Only Steam’s portion of the sales it produces is estimated in the few billion dollars every year. A 20% of that would mean capturing more than 1 billion dollars.

Hardware

Alphabet competes with thousands of companies, and three of them base a huge portion of their revenue in selling hardware for games: Microsoft, Sony and Nintendo, sales of +40M Xbox One,  +90M PS4, +30M Nintendo Switch make for a really important stream of cash for these companies. The need for hardware with Stadia is not gone, the user will need a device to run the games on, and even if someone acquires Stadia’s official controller, they still need a screen to actually play games. But the hardware no longer requires to be specialized: no need to buy graphic card with a price cut higher than 200$, 300$ or 1000$; no need to spend 300$ or more to access the platform through its specialized console; no need to spend 500$ or more in a gaming phone.

The alternative proposal from Google is to reuse general hardware that you already have bought, or maybe just spend a bit more in a controller or a better router, and enable billions of already existing devices to play games with high quality.

What could be the impact of Stadia if it manages to steal 20% of users from consoles? 35M less consoles sold only in one generation, worth more than 10 billion $ in revenue, and this is not counting the losses derived from not selling games for those consoles.

In some cases, probably a worse product

Will Stadia be able to provide stable, always available, everywhere accessible, high-end graphics gaming for everyone? Not in decades. The infrastructure is far from ready for this in most places and the product introduces some aspects that needs to be understood by customers: the regular, cheap router will probably have problems to provide an stable-high quality connection, the service quality will vary based on the traffic of the network, if someone is using your internet connection and uploads a video to Youtube, your game will drop from 4K to 720p… 

Also to target experienced gamers, the entry barrier for Stadia is quite high: they have built their game libraries for decades and, for the last 15 years, lots of them did it digitally and most of the games they acquired will probably not be available in Stadia so the transition between platforms will be slow for them.

But why would the market make a more unreliable product,with less games, with probably a lower quality experience, be successful? Because the main selling point of Stadia is that it will be cheaper. The transfer of hardware cost from the user to Alphabet will make the whole market more optimized and thus the prices should drop.

Pricing architecture, the other key to Stadia

One of the key elements missing from the GDC presentation was pricing, both for developers and for users. In the developers side, Stadia will probably require a periodical fee or a time based fee so if players spend more time into the game, you will need to pay a higher fee. If this turns out to be true, it will most probably require some changes in how the games are funded and that will affect how players pay for the games, we have already been seeing this for a while: Steam’s offers, second hand markets or DLCs are examples of this.

One of the models that might succeed is the already existing one implemented in EA’s Origin: you can pay 5$ per month to access the basic library, or 15$ per month and you get the entire collection of games including the newest ones. This will provide more control to users about how much they pay and also should allow for more customizable offers, and this aspect is key to define some of the main potential customers of Stadia: casual gamers willing to spend some dollars every month, but that are not willing to keep investing hundreds in a device only for gaming. This target was already focused with a different approach: mobile games. Game that have less depth than traditional games, with multiple revenue streams and that target a less passionate but economically equally important target.

It is clear that Stadia is not designed for the high-end gamer, but mobile games aren't either, and they have had a huge impact in the market and brought millions of new players. All these aspects, the impact in how we will perceive distribution platform of games, the lack of need of specific hardware and a cheaper proposal, if done right, might imply that Google dominates a big portion of the gaming industry for the next several years. And if Stadia fails, at least we will have improvements in infrastructure of Internet.


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