Google throws down clear challenge to gaming world
New video game streaming service has potential to upend $135bn industry
Google has thrown down a clear challenge to the gaming world: that using the global network of data centres that run its internet empire, it is set to unleash enough raw computing power to blow away the industry’s current way of doing things.
Add YouTube as a shop window — a place where some 200m people a day come to watch gaming-related videos — and the internet giant believes it has some of the most powerful assets on the planet to reshape a $135bn-a-year business.
But as it took the wraps off its first entry into the gaming market, a streaming service called Stadia, the gaps in its armoury were equally telling. There were no actual games it could point to for its first customers to play, and no indication what they would be asked to pay — or, for that matter, what business model it would seek to foist on a games industry wary of the intrusion of giant internet platforms.
That has made Google’s entry into gaming a sign of both the disruptive nature of the cloud revolution that is encroaching on the console games business, and the distance the industry has to go to build out online gaming services for a mass market.
Over the past decade, smartphones and app stores opened up a market for casual forms of gaming, and now account for the largest segment of the market in terms of revenue. That left the market for console and PC games, where the most serious players spend their time, largely untouched.
The gaming industry is now braced for change, similar to the transformation that cloud-delivered services and subscription-based payment have brought to video and music.
Some companies are already developing their own cloud services. Microsoft has outlined a strategy to include cloud-delivered games, while Sony has a similar service for older games on its PlayStation.
Coming fresh to the industry, however, Google is betting that sheer computing power will tip the balance, with few other companies able to give customers a console-like experience with games delivered over a network.
“What we’re doing is at the absolute bleeding edge of networking and computer science,” said Phil Harrison, vice-president in charge of Google’s gaming business. “The fact that it’s games is almost secondary. This is a tremendously hard problem to solve.”
Two other companies likely to follow Google into the cloud-gaming market soon are Amazon and Tencent, said Piers Harding-Rolls, an analyst at IHS Markit. Both operate leading cloud-computing platforms and have investments in the gaming world.
In Amazon’s case, that comes through Twitch, the leading service for watching other people playing games, which the ecommerce company acquired five years ago. Google, by tying its game service to YouTube — where gamers will be able to click on a link to play a game straight from a video and broadcast their triumphs — has stolen a march on its US rival.
Shares in Japanese console makers Sony and Nintendo fell on Wednesday in Tokyo, sliding more than 3 per cent in what analysts said was a knee-jerk reaction rather than a measured assessment of the new threat.
While the services outlined by Google represent a risk to the physical console, it is some way in the future, said Tokyo-based games industry consultant Serkan Toto. The threat cannot properly be assessed until Google fleshes out details on how it will monetise its services and how much it will cost to develop games on its platform, he added.
“I don’t think Nintendo and Sony are going to be shell-shocked,” Mr Toto said. “Two years ago it would have been a shock but I think now everyone knows which way the industry’s ship is heading, Sony and Nintendo especially.”
On an earnings call in February, Hiroki Totoki, Sony’s chief financial officer, said cloud gaming could pose a threat to PlayStation in the next five years. “With a shift to cloud, one extreme end of the debate is that hardware will no longer be necessary,” Mr Totoki said. “But we believe that would take a much longer time horizon.”
Cloud gaming has seen false dawns before. The first US company to try, OnLive, fizzled seven years ago, a victim of patchy streaming technology and a lack of financial staying power.
Google is betting these problems will not be repeated. It boasted that a game running on a single chip in one of its data centres could have the processing power of a powerful supercomputer, at 10 teraflops — as much as the top-of-the-range PlayStation and Xbox consoles combined. That news added nearly 12 per cent to shares of AMD, the company supplying the chips.
Key to the Stadia service, according to Google, are the more than 7,500 nodes, or endpoints, to Google’s cloud computing platform: the closer users are to a node, the lower any lag they will experience in the service. Also, rather than being relying on the public internet “backbone”, the company said it would use thousands of miles of its own fibre-optic cable to carry its traffic as far as a gamer’s ISP, improving quality.
Still, many in the industry question whether Google will be able to match the immediacy of playing a game on a console. David Pucik, an analyst who took part in a trial game-streaming service late last year, described the performance as uneven. But Mr Harrison said Google had made improvements since then and was confident it could deliver games in the latest high-definition standard, 4K, and running at 60 frames a second.
Besides saving customers the cost of buying a new console or high-end PC, backers of cloud services such as Stadia say they will bring new gaming experiences that cannot be matched by current hardware.
Google said, for instance, that multiplayer games would be greatly improved when all users’ gameplay is processed at a single data centre at the same time, making it possible to add thousands of players at a time. Players will also be able to compete against friends who are using hardware from different companies, and a game could be paused on one device and restarted on another, transferring it from a TV screen to a mobile phone.
Yet Google’s lack of games to distribute on Stadia is a serious gap in its plans, said Mr Harding-Rolls, saying that getting access to exclusive content from independent developers will be essential. He says he expects that Google will turn to acquisitions to boost the new, in-house gaming studio it has created.
“A fundamental foundation of Google’s business is that our partners are successful on our platform,” said Mr Harrison. Finding the right formula to win over the games industry will be critical to ensuring a good reception for Stadia at its planned launch before the end of the year.