Advertisement
|20 March, 2019

Rivals can fly around Google’s game cloud

CEO Sundar Pichai’s starting point is a streaming product, Stadia

Google CEO Sundar Pichai speaks during the Google keynote address at the Gaming Developers Conference in San Francisco, California, U.S., March 19, 2019.

Google CEO Sundar Pichai speaks during the Google keynote address at the Gaming Developers Conference in San Francisco, California, U.S., March 19, 2019.

Reuters/Stephen Lam

HONG KONG  - It’s not quite game over yet. Google said on Tuesday that it was launching a browser-based video-gaming service, wiping some $3 billion off the value of Japanese console makers Nintendo and Sony. But while the U.S. web giant’s global scale intimidates, victory depends on securing exclusive titles that can out-drive Super Mario - not just lots of servers.

CEO Sundar Pichai’s starting point is a streaming product, Stadia. It’s a Netflix of games which will host third-party offerings, plus some Google itself will develop. Details are vague, but the announcement comes as the $180 billion industry enters a period of rapid transition, driven by cloud-based services replacing compact discs and hard drives.

The migration to subscription-based streaming, similar to what has happened in film and television, is already shaking up old business models, in particular those at console makers like Nintendo, Microsoft, and Sony – and the latter two are expected to bring offerings to market this year. A Google-accelerated transition to hardware-agnostic subscriptions could give game publishers more negotiating leverage over revenue, and sap appetite for Switches, Xboxes and PlayStations. Google could speed things up even more if it starts snapping up popular games.

Advertisement

Even so, the market reaction may be overdone. Google will have to compete with established champions who already draw in aficionados. It may have to contend indirectly with the likes of Chinese gaming giant Tencent, or even Amazon.

As for Nintendo and peers, they might be in a better position than they look. Technologically there is little consoles can do that a specialised gaming computer can't. Yet serious players prefer dedicated hardware, and are willing to pay for boxes designed to render realistic explosions, for example. They will shell out big bucks for games too, which is why publishers are so willing to cooperate with console companies. The industry - which was founded in the 1970s by Atari and Magnavox - might look ready for obsolescence, but it is still worth $53 billion, per Morgan Stanley estimates - on par with the PC market.

A big player is a threat, no doubt. But it’s hard to shake up the leader board.

On Twitter https://twitter.com/petesweeneypro

CONTEXT NEWS

- Alphabet Inc's Google announced on March 19 that it would launch a browser-based video-game streaming service this year. The product, called Stadia, will attempt to capitalise on the company's cloud technology and global network of data centers.

- Google offered few details on timing, pricing or available titles for the service.

- Shares in Sony and Nintendo, both leading manufacturers of console gaming systems, fell over 3 percent in morning trade in Tokyo on March 20, underperforming the wider index.

- For previous columns by the author, Reuters customers can click on SWEENEY/

- SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS: http://bit.ly/BVsubscribe

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)

(Editing by Clara Ferreira Marques and Katrina Hamlin) ((pete.sweeney@thomsonreuters.com; Reuters Messaging: pete.sweeney.thomsonreuters.com@reuters.net))

More From Technology