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

Google's Stadia service was an attempt to break into cloud-based game publishing and development. However, a poor launch product and poor sales model almost brought it down as soon as it began.

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 Stadia would be ending. 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. Over the next few months, all Stadia users who purchased hardware and games via the Google or Stadia shops will be refunded their money.

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.

Google had made significant investments in the past that indicated its intention to be a major player for mainstream games publishing and development. This included opening two new game studios in Los Angeles, and Montreal, as well as hiring industry veterans such as Harrison, who was previously employed at Sony, Atari and Microsoft before joining Google and Jade Raymond, a former Ubisoft producer.

Although the hype was real for most, Stadia launched in Nov. 2019 with incomplete software and a truly 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 was unable 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. Google abruptly shut down its internal development studios, and made Stadia a low-overhead games publishing platform.

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.

Microsoft also used its Xbox Cloud Gaming initiative to add value to its Xbox Game Pass service, rather than as a standalone service. To play games on your console, PC or supported mobile device, you can subscribe to Game Pass Ultimate to get the cloud option. 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 the use of cloud technology to emulate the PlayStation 3 (which is notoriously difficult) for streaming games from its library.

As recently as this week, analysts have released data that shows that cloud gaming enthusiasm is slowly growing in America. Parks Associates released Monday's report showing that at least 35,000,000 American households would be interested to purchase a cloud gaming service for a price of $9.99/month.

Stadia's overwhelming impact seems 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.

Stadia users could only purchase individual games at their retail price or play them for a short time as demos. Stadia wanted to charge full MSRP to what amounts to conditional access. This could theoretically be withdrawn at any time due a contract expiration, licensing conflict, or other reasons. There was no streaming alternative, such as Xbox Game Pass and PlayStation Plus.

The few Stadia exclusives will also be removed from the market when Stadia closes down, unless or until their publishers post them on 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. Both local and physical media have their disadvantages, but neither will suddenly cease to exist due a 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 its cloud gaming efforts, it seems that Harrison's final words were that it went first and made all the big mistakes.