Google pushes into US$180b video gaming industry with new game streaming service Stadia

Google announced on Tuesday that it would launch a browser-based video game streaming service dubbed Stadia that attempts to capitalize on the company's cloud technology and global network of data centers.
Google vice-president and general manager Phil Harrison shows the new Stadia controller as he speaks during the GDC Game Developers Conference.
Google vice-president and general manager Phil Harrison shows the new Stadia controller as he speaks during the GDC Game Developers Conference.PHOTO: AFP
Google CEO Sundar Pichai speaks during the GDC Game Developers Conference in San Francisco.
Google CEO Sundar Pichai speaks during the GDC Game Developers Conference in San Francisco.PHOTO: AFP

SAN FRANCISCO (BLOOMBERG) - Google is getting into gaming in a serious way.

The Alphabet unit unveiled on Tuesday (March 19) a new game streaming service called Stadia at the Game Developers Conference in San Francisco.

The announcement marks a major new foray into the US$180 billion (S$240 billion) industry for the Internet giant.

Stadia lets developers build new games on a streaming platform that will allow players to access the action through the Web instead of having to buy expensive consoles or personal computers.

The company also introduced its own game controller, which creates console-like gaming on a computer or smartphone.

Alphabet shares rose less than 1 per cent in New York.

Google already has a hefty presence in gaming through its Android app store, one of the most popular mobile game marketplaces.

But the search giant and peers like Amazon.com, Facebook and Apple have less of a central role in the lucrative hardcore gaming market, which still runs on hardware like Sony's PS4 and Microsoft's XBox and has spawned a huge e-sports entertainment industry.

With Stadia, Google is aiming to bring more complex games to more people.

"Technology should adapt to people, not the other way around," chief executive officer Sundar Pichai said at the event.

"We are dead serious about making technology accessible for everyone."

Google wouldn't say how much it will charge users, or whether it will be funded through advertising like most of its other businesses. The service will launch later this year, the company said, without announcing partnerships with the top-tier game developers.

"There's no word on pricing, what's the revenue model?" said Mr Joost van Dreunen, co-founder of gaming research firm SuperData. "It's a little bit like saying we're going to start a restaurant but we have no idea what cuisine we're making."

Stadia runs through the company's YouTube video-streaming platform and takes advantage of Google's extensive network of data centres.

While the company didn't announce a price for the service, it said artificial intelligence technology helped make the product possible. With its presentation, Google drove home the point that its technical tools alone would make the future of gaming services work.

It repeatedly mentioned the advantage of its cloud-computing power and YouTube, suggesting the service is designed to bring more users to those units - two areas where investors are looking for sales growth beyond advertising.

Still, Google will need to persuade game publishers to put their content on Stadia if it wants to attract gamers, said Mr Jitendra Waral, senior Internet analyst at Bloomberg Intelligence.

"Google's pitch of leveraging infrastructure and YouTube to enable cloud gaming is a logical extension of their strengths," Mr Waral said. "The question is, can the content and experience compete with Sony or Microsoft?"

Google may need to acquire in the area "because content will remain the king irrespective of the technology", he said.

That's what investors should look for in the next few months: Whether Google can persuade big game developers to bring their content to Stadia, and at what price, Mr van Dreunen said. That could cost the Internet giant hundreds of millions of dollars.

Google also said it is forming a studio to create its own games, led by Ms Jade Raymond, a former executive for gaming company Ubisoft Entertainment. Google did not say how much it would spend on that initiative.

 

The high-end streaming quality Google claimed in its announcement will be accessible only for people with fast Internet connections, Mr Waral said.

"For the infrastructure and consumer to be ready for this movement, we will have to wait a couple of years."

Stadia could also add a new source of rising costs as the company builds out its cloud business and hires thousands to monitor content on YouTube.

In addition to buying video games for the service, Google will also have to modify and upgrade some of its data centres to handle the game-specific traffic generated by the new service.

Game developer stocks moved on the announcement. Activision Blizzard jumped as much as 5.2 per cent and Take-Two Interactive Software gained 3.2 per cent. Electronic Arts fell as much as 2.7 per cent.

A spokesman for Take-Two declined to comment, while representatives for the other developers did not immediately return requests for comment.

The company announced a partnership with chipmaker Advanced Micro Devices to help power the service. AMD shares rose more than 11 per cent.