Two Investing Legends Join Forces for One Night ONLY…

and reveal the massive market events that will shape 2020 — and what they recommend you do NOW with your money.

Tue, December 10 at 7:00PM ET

Google’s Stadia Leaves Us With More Questions Than Answers

Google Stadia looks like a step up, but don't be fooled -- we've been here before

One of the companies making the biggest splash at 2019’s Games Developers Conference (GDC) in San Francisco isn’t Microsoft (NASDAQ:MSFT) or Sony (NYSE:SNE) … it’s Alphabet Inc’s (NASDAQ:GOOG, NASDAQ:GOOGL) Google, which just announced its own dedicated cloud streaming platform for gaming — Stadia.

Google's Stadia Leaves Us With More Questions Than Answers
Source: Stadia

The move to cloud gaming has long been suspected. Google spent the past few months testing “Project Stream,” which gave users access to Assassin’s Creed Odyssey through Chrome of all places.

By most accounts, it was a success, with Polygon’s Austen Goslin describing the experience of the browser, cloud-based stream as “surprisingly great”:

“The first, and most surprising, thing you’ll likely notice when the game loads is that it … works. Assassin’s Creed Odyssey runs about as well from the cloud as if you had just installed the game normally. Movement is responsive, and combat feels fluid. Even dodging enemy attacks was easy, and I never fell victim to the kind of input lag that has often plagued game streaming in the past.”

That’s high praise.

[Editor’s Note: This story was originally published Tuesday and has been updated with new information.]

I’ve played my fair share of game streams via Sony’s PlayStation Now, and the experience was nothing short of miserable. With Stadia, Google has shown (from GDC’s stage) instant access to games from the jump — no downloading or waiting. But will it actually work that well, for everyone, consistently?

And why would Google decide to jump into the video game fray? What’s the upshot here, if any, for GOOGL stock? Let’s unpack this bit by bit.

Why Google Thinks It’s a Good Idea

When I first heard that Alphabet Inc’s Google would be unveiling a gaming platform, my first thought was “remember Google Plus”, followed by “remember Google Glass”, followed by … you get the idea. There’s a reason Alphabet was formed in the first place (aside from the muddy politics of ownership) — to eke out its moonshots from the rest of the business.

I have doubts that Google’s gaming ambitions will fall into the “serious” money-making side of Alphabet’s business. (GOOGL stock is pretty much flat today, as investors are also lukewarm about all of this.)

As Twitch streamer Corey Michael, known as “King Gothalion,” put it live on stream this morning: “I don’t think gamers will support it … it would be like Facebook getting into the gaming industry.” I’m paraphrasing here, but that was the gist of what he said. And I agree. The only serious contribution Facebook brought to the video game industry, it bought. Aside from that, FB has tried and failed to crack the gaming-verse for several years, finding brief success with flashes in the pan (Farmville) but nothing that would momentously impact its business. Most people don’t even have faith in Oculus anymore. So why would Google think it can compete?

It doesn’t.

Google’s endgame here is what its endgame has always been — access to more users’ data. Facebook may not have beaten Microsoft or Sony, but its social-based games did attract people into its ecosystem and “persuaded” them to give up more of their data. If Google can accomplish this, it has a loss leader it can live with.

Think about the troves of data it can collect by siphoning gamers into its ecosystem, as they buy, stream, watch and use any number of Google services across any number of devices.

Sure enough, a gaming system that exists purely in the cloud does stimulate curiosity — access to triple-A games without having to buy an expensive gaming system that you’re only going to replace in three to five years? Instant access, and the ability to seamlessly move from device to device without stopping your game? Yeah, I’d at least check that out.

Since Google’s streaming platform doesn’t require a console and, instead, will be playable on Chrome or any number of everyday devices, and because Google’s already-existent data centers will handle the heavy calculations required to stream, there’s really nothing for Google to invest in here aside from games developers themselves, and the talent to run Stadia. That’s a drop in the bucket for Alphabet Inc.

Why It’s a Terrible Idea

There’s the big question of how Google expects to pull off the glossy promises it made about Stadia.

Because of its very nature, you need to always be online to play games on Stadia. That didn’t work out well when Microsoft tried it with Xbox One back in 2013, and I don’t expect it to work now.

When Microsoft attempted to bill the Xbox One as an always-online console, one of its employees told people to “deal with it” in regards to not always having internet access:

Source: Engadget

No matter how perfect it looked on stage, there are always issues when dealing with internet speeds in the real world, in real time. The same Polygon writer who praised the platform for its responsiveness also found some issues [emphasis mine] in Project Stream’s test:

“The only consistent downside to the streaming version of the game, which I found across all hardware and connections I tried, was some fairly aggressive audio compression. This was, at its very worst, a noticeable issue, and that was only during some of the game’s louder cutscenes. For the most part, while wandering around the world and completing quests, the audio was perfectly fine.”

Imagine if you were a user in, say, rural Virginia? How would this work without an extensive infrastructure overhaul?

Google didn’t even try to alleviate these concerns, skipping over questions about input lag and general connectivity issues completely. How fast does one’s internet need to be to stream games optimally?

No one knows.

[Update: Since its announcement on Tuesday, March 19, Google has revealed internet speed recommendations of 25 megabits per second for smooth, 60 frames per second gameplay at a 1080p resolution. The internet speed recommendation will be greater — up to 30 megabits per second — for 4K resolutions. Furthermore, Stadia will adjust a user’s resolution based on their bandwidth speed, so lower resolutions will also be possible on the system.

Addressing latency concerns, The Verge, asserts that the internet speed won’t have a direct impact, but rather the proximity to the “server you’re playing on” will be the determining factor.]

But seriously, how tone deaf are Alphabet’s executives to think that releasing this now, let alone at all, would be a good idea?

We live in a post-Cambridge Analytica world, and a world where YouTube’s algorithm is so broken, it’s directing users to white supremacist content from, interestingly enough, video game streamers. The last thing Google should be doing is pointing more people in the way of a broken system, touting it as a feature and not a bug.

Instead, Google is releasing an always-online platform to interact more deeply with YouTube’s faulty algorithm, complete with a controller and a microphone to access Google Assistant.

Good luck, I guess.

As of this writing, John Kilhefner did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

©2019 InvestorPlace Media, LLC