- A year ago, Google announced it would shut down its in-house Stadia game studios.
- It has since worked to secure white label deals with partners such as Bungie and Peloton.
- Increased consolidation in the games market poses challenges to Google’s plan.
When Google announced last year that it was closing its in-house game studios, it was seen as a blow to the company’s big bet on video games. Google, whose Stadia cloud service is just over a year old, said it would instead focus on bringing games from existing developers to the platform and explore other ways to bring Stadia’s technology. to its partners.
Since then, the company has shifted its Stadia division largely towards striking white-label deals with partners including Peloton, Capcom and Bungie, according to people familiar with the plans.
Google is trying to salvage the underlying technology, which is capable of streaming high-definition games over the cloud with low latency, by buying the technology from partners under a new name: Google Stream. (Stadiums was known in the development as “Project Stream”.)
Consumer platform Stadia, meanwhile, has been deprioritized within Google, insiders said, with reduced interest in trading blockbuster third-party titles. Management is now focused on securing business deals for Stream, those involved in those conversations said. The changes demonstrate a strategic shift in how Google, which has invested heavily in cloud services, views its gaming ambitions.
Last year, Google entered into conversations with Peloton to be a back-end provider for games running on the fitness company’s bikes, three people familiar with the situation said. Platoon unveiled the first of these gamestitled “Lanebreak,” in the summer and launched a closed demo late last year, backed by technology from Google.
Last year, Google also presented its technology to Bungie, the developer of the “Destiny” franchise, which was exploring a
platform of its own, according to three people familiar with the discussions. Under the proposal, Bungie would own the content and control the front-end experience, but Google would power the technology that delivered the games to users’ screens.
Talks between Google and Bungie have made “significant” progress, according to a person familiar with the plans. Sony, owner of PlayStation, announced this week that it would acquire Bungie for $3.6 billion. While Bungie said it would continue to support Stadia, insiders were unsure if the merger would affect plans between Google and Bungie. Sony has reached an agreement with Microsoft to support its cloud gaming service. A Bungie spokesperson did not respond to a request for comment.
Google has struck at least one deal: In October, AT&T began allowing customers to stream the game “Batman: Arkham Knight” directly from their web browser. While Google’s branding was nowhere to be found, AT&T confirmed the game was running on Stadia technology.
The company has discussed a similar deal with Capcom, publisher of the popular “Resident Evil” franchise, in which Capcom would host demos for new titles on its Google-powered website, insiders said.
Google continued to support the consumer Stadia platform with a steady stream of titles. After Google shut down Stadia’s in-house game studios, known as Stadia Games & Entertainment, insiders said the directive was to create what was internally dubbed a “content flywheel” – a a steady stream of indie titles and content from existing publishing deals that would be far more affordable than securing AAA blockbusters, said two former employees familiar with the conversations.
“The bottom line was that they wouldn’t spend millions on headlines,” one said. “And exclusives would be out of the question.”
Managers and employees of the Stadia product have also changed roles. Phil Harrison, the former PlayStation executive whom Google tapped to manage its gaming operations, now reports to the company’s head of subscriptions.
Patrick Seybold, a Google spokesperson, told Insider in a statement, “We announced our plans to help publishers and partners bring games directly to gamers last year, and we’re working on it. The first manifestation was our partnership with AT&T which offers Batman: Arkham Knight available for free to their customers.
“While we are not commenting on any rumors or speculation regarding other industry partners, we are still focused on bringing great games to Stadia in 2022. With over 200 titles currently available, we plan to have more than 100 games added to the platform this year, and we currently have 50 games to claim in Stadia Pro.”
Phil Harrison has touted Stadia as “the future of gaming”. Now he is trying to save him.
Google wasn’t the first company to dabble in cloud gaming, but it touted Stadia as a game-changing platform capable of delivering AAA titles to users’ living rooms and portable devices without expensive hardware. The experience would be seamless: someone could watch a game being played on YouTube and access it with a single click, provided they have a good internet connection.
Stadia’s core technology has been widely praised — even though the platform it supports gets lukewarm reviews — and Google is trying to squeeze as much value out of it as possible. Internally, some employees have floated the idea of using Google’s technology for purposes other than gaming, such as 3D modeling and other high-intensity tasks that could be done in the cloud.
But the strategy’s pivot also led to a stream of employees leaving Stadia last year, including executives. Jack Buser, Stadia’s former games director, moved to Google cloud unit in September. Teddy Keefe, Stadia’s Head of Partnerships for Europe, Middle East and Africa, left Google last month.
In the summer, after Google closed its internal game studios, the Stadia division was reorganized under the subscriptions and services section of Google’s device group. Harrison, who previously reported directly to Rick Osterloh, chief devices and services officer, now reports to Jason Rosenthal, Google’s vice president of subscription services, two people familiar with said.
Harrison also returned to his London home. He had been in California since 2018, working from Google’s headquarters in Mountain View.
Google’s 2018 hiring of PlayStation and Xbox veteran Harrison signaled that the search giant was poised to make a splash in video games. He joined Google CEO Sundar Pichai on stage at the Game Developers Conference in San Francisco the following year to unveil Stadia, promising users access to a library of exclusives and established franchises that would all stream to the cloud.
But when Stadia launched a few months later, it was missing several key features. Bloomberg reported that there were tensions between employees who wanted to present Stadia in beta testing and executives who wanted to follow a more traditional console launch.
Google also struggled to retain users. Harrison and other executives set a goal of reaching 1 million monthly active users by the end of 2020, which they missed by about 25%, according to a person familiar with the conversations. “Retention was a real issue,” this person said.
Meanwhile, Google was operating in an increasingly difficult industry. When Microsoft announced in 2020 that it would acquire “Elder Scrolls” studio Bethesda, it “frightened Google executives,” said a former employee familiar with the conversations. After Stadia shut down its in-house games division, insiders said any appetite from Google executives to own studios was completely gone. It also struggled to attract studios to develop for the platform; some game officials previously told Insider that Google would offer pricing “so low it wasn’t even part of the conversation.”
Industry consolidation continued. This month, Microsoft announced that it would also acquire Activision, the creator of the “Call of Duty” franchise, for $68.7 billion. The gigantic merger – the largest ever in video games – brings another major publisher out of the field. PlayStation CEO said after his purchase of Bungie that the industry would likely make larger acquisitions.
Google continues to bolster the consumer Stadia platform with new games, but few AAA-level players have been promised, and some customers have become frustrated by what they see as a lack of communication from Google.
The company spent tens of millions of dollars early on to secure blockbuster titles for Stadia, including Rockstar Games’ “Red Dead Redemption 2.” Last year, Rockstar released a remastered version of three of its older “Grand Theft Auto” titles across multiple platforms. There is no mention of the game coming to Stadia.
Further market consolidation risks compressing Stadia’s consumer platform and could make it harder for the company to secure deals with major game developers and publishers for Stadia games and white-label opportunities.
“Stadia’s cloud technology is awesome. The question is how do you make that technology work for partner publishers who may not want to develop their own technology but also want to have their own branded service,” said Mat Piscatella, NPD analyst. “But the big questions are how many of these publishers will there be if and when the cloud gets mass market traction and how might the economy work?”
Current and former employees said the priority now is on proof-of-concept work for Google Stream and securing white-label deals. One of them estimated that around 20% of the attention was on the consumer platform.
“There are a lot of people internally who would like this to continue, so they’re working very hard to make sure he doesn’t die,” they said. “But they’re not the ones who do the checks.”
Are you a current or former Google employee? Do you have any advice? Contact journalist Hugh Langley at [email protected] or via encrypted messaging apps Signal and Telegram at +1 628-228-1836. Reach out using a non-professional device.