Cloud gaming is not a new idea. For nearly 20 years companies have been trying to make it work but have been hindered by technology, and infrastructure. Phantom Entertainment (formally Infinity Labs) was the first to pitch the idea back in 2003, since then many have tried but few have succeeded.

Google launched Stadia, its cloud gaming service, too much fanfare in November 2019. Now 15 months later, after failing to gain any real traction in the market, Google is shutting down its internal Stadia game development division, Stadia Games and Entertainment (SG&E), to refocuses Stadia on being a “technology platform for industry partners.” According to Phil Harrison, Vice President and GM of Google Stadia, we’ve decided that we will not be investing further in bringing exclusive content from our internal development team SG&E, beyond any near-term planned games.” Google’s decision to close Stadia Games and Entertainment (SG&E) is a clear indication it is “waving the white flag” in the subscription game market, at least as a consumer product (For further analysis of Google Stadia’s decision to close its game studios see Strategy Analytics report Is It Game Over For Cloud Gaming As Google Closes Stadia Game Studio?).

A lot of time an effort has been dedicated to overcoming the technical challenges of delivering a quality streaming gaming experience, but not enough effort has gone into determining if this is a viable opportunity.  Too often companies have taken the Field of Dreams approach – “if you build it, they will come.” History has shown, this is not an effective go-to-market strategy.

Companies consistently focus on the Four Ps – Product, Price, Promotion, and Placement, but neglect probably the most important topics.

1. Who is this product or service for?
2. Does this product or service solve a problem or provide a tangible benefit to the target market?

While Google talked a lot about Stadia’s capabilities it never made a compelling argument as why people might want this service. Google, and other services have positioned subscription game services as appealing to existing and aspiring gamers who want to jump into big-budget AAA titles without having to spend $300 to $500 on a game console, like the PS5 or Xbox Series X, and an additional $70+ per game.

Companies clearly have not done sufficient research into how big this segment is or what motivates them. In theory gamers might say they would like to have this capability, but a discrete choice exercise would be able to tease out more realistic answers given available options (e.g., other platforms, release dates, price, etc.). Rather than assuming that there is a large segment of consumers waiting for a cloud gaming service Google and other subscription services need to do in-depth research on the market. This includes...

1. Segmenting the market.
2. Defining a clear, compelling value proposition
3. Identifying the target market.
4. Assessing interest in a new product/service idea
5. Identifying pain points, if any, by segment.
6. Sizing the opportunity.

While it is possible that Google and others have done the necessary research to properly gage the subscription gaming opportunity, they have not shared any of this information, calling into question whether or not they have done so. If anyone other than Microsoft and maybe Sony are going to succeed in this market, then they MUST make this effort.

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