Wednesday, Mar 20th 2019

Google Unveils Its "Netflix of Gaming"


Google's cloud gaming push has the potential to disrupt a massive $130 billion market, but will need to overcome some key hurdles first.

On Tuesday, Google unveiled Stadia, a new cloud-based gaming service that would allow anyone to game on any device using just a Chrome browser - no consoles or specialized hardware needed.

As a rapidly growing market that now nearly rivals the film industry in size in the U.S., gaming is a very attractive market - and some people are already dubbing Stadia the "Netflix of gaming."

However, we believe there are 3 major hurdles that Stadia would need to overcome in order to attain the runaway success that Netflix has seen:

  • Competition. We believe Stadia will soon be competing with Amazon, who is rumored to be developing a similar cloud gaming product built on top of its market-leading game streaming platform, Twitch. Coupled with its industry-leading cloud assets, we believe Amazon poses a significant threat here, even as a second entrant pitted against Google.

  • Internet speeds. It's unclear whether current internet speeds are fast enough to support the bandwidth a cloud gaming service would likely require. We believe that only 20% of American households have access to the download speeds Stadia would require, and noticed that even during the live product demo on Tuesday, Stadia seemed to suffer from some buffering problems.

  • Consumer behavior. Perhaps most importantly, we believe there may need to be a meaningful shift in consumer behavior if Stadia is truly to take off. Each year, the majority of the gaming world's attention tends to be concentrated on just a handful of flagship games. This in theory would reduce the necessity and value of the streaming/aggregation approach that Stadia appears to be taking.

It remains to be seen whether this consumption dynamic merely represents a "content discovery" problem waiting to be solved by Stadia (much like what Netflix did for film/TV) - or is rather evidence that the film/television analogy may not be as relevant for gaming as it may seem.

Stadia is set to launch at some point in 2019 - we'll be keeping a close eye on the rollout for further updates.

As of this writing, GOOG was a portfolio holding of Titan. This security may cease to be a portfolio holding at some point in the future.
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