The arc of the tech industry has always been to imagine and then glimpse the future before it fully arrives, and then watch the public struggles of those who try to will these paradigm shifts into existence. From virtual and augmented reality to the current obsession with the metaverse, it seems nearly impossible to chart how something grows from science fiction to fully fledged product.

Much like its futuristic counterparts, cloud gaming feels like one of those inevitable pillars of the future, when internet connections are faster and more ubiquitous and streaming a video game becomes as seamless as listening to Spotify. But open questions remain: How will the gaming and tech industries trying to crack the cloud arrive there? And which companies and platforms might survive a potential future of consolidation, shutdowns and pivots?

To date, cloud gaming’s biggest struggle has been balancing a viable business model with an experience that can come close in quality to traditional gaming on local hardware. There have been countless services sent to the cloud gaming graveyard either because the products did not have a sensible enough pricing scheme or strategy to distribute games, or, more often, because the technology itself delivered a gaming experience so deficient that consumers abandoned it.

“I agree that everybody today is looking for the right model. I don’t think the right model has been clearly identified yet,” said Ivan Lebeau, president and founder of enterprise cloud gaming service provider Gamestream.

The current poster child of the industry, Google Stadia, has struggled over the past few years to succeed, while competitors began to outpace it in pricing, availability of software and in the technical sophistication of the streaming tech. But Google’s struggles are providing the still-nascent cloud gaming market with a roadmap for moving forward, if only as a cautionary tale on what’s necessary to achieve that tricky balance between cost, accessibility and performance that could one day truly make gaming hardware obsolete.

“You have big companies providing cloud solutions, services like Amazon, Google, Microsoft, Tencent and Alibaba,” Lebeau said. “But some of them made some mistakes because they didn’t know anything about video games, and they thought it was easy to target gamers, but it’s not. Gamers are very demanding in terms of quality.”

One of Google’s earliest and most visible stumbles was in marketing Stadia as a wholesale console and PC gaming replacement. When the service launched in fall of 2019, it was lacking key features promised during its unveiling earlier that year and required buying a bundle that included a controller, Chromecast Ultra streaming dongle and a Pro subscription to access it in early access.

Google didn’t launch a free tier until the following April, and it wouldn’t be until over a year after launch that it arrived on the iPhone. This staggered and sloppy launch gave the impression that Google’s vision wasn’t a clear one, and that a future dominated by the cloud was perhaps many years, if not decades, away.

“Gamers are just very used to owning the hardware. Not just PC games, console games as well. Mobile gamers even like to have recent smartphones and the latest smartphones,” said Newzoo analyst Guilherme Fernandes. “The sense of ownership of the hardware is very important for some gamers. It would be too sudden to just come in like Stadia did and say, ‘This is the future. Get ready and forget about everything you’ve done for the past 20 to 30 years or more of owning hardware.’”

But perhaps the biggest concern with Google’s approach to cloud gaming was its business model. The company asked players to buy games at full price, and those games lived only on Stadia. The Stadia Pro subscription service has been growing slowly, and only now three years later does it contain more than 50 games you can play for free with a $10 monthly subscription. But the biggest titles on the platform — like CD Projekt Red’s Cyberpunk 2077, Ubisoft’s Assassin’s Creed Valhalla and Rockstar’s Red Dead Redemption 2 — are not part of that subscription service.

Google spun up an internal studio division to develop exclusives that would theoretically have lived on Stadia Pro, but the company shocked the industry when it closed down those studios early last year after failing to deliver a single new game.

That means if Stadia, which is no longer invested in building its own games, ever does go dark, players might lose access to their entire libraries. That very situation happened last month when T-Mobile parent company Deutsche Telekom announced it would shut down its cloud service, Magenta Gaming, on Feb. 26. As it stands, there’s no way for subscribers to transfer their games to other platforms or even their save files.

“The two services, Magenta Gaming and Stadia, have a similar business model, and unless Google goes the extra mile to try and save its relationship with the user base, I would assume if the service closes people would lose access to the games,” Fernandes said. “When we compare that to what Xbox does, which is subscriptions, and [Nvidia’s] GeForce Now that links the user’s account to their Steam and Epic Games account and so on, even if the service closes they will retain access to the games. It provides a lot more confidence for the user.”

Microsoft added cloud gaming as a complimentary benefit to its more expensive Game Pass subscription tier, while also making most of its Game Pass library free to stream, first on mobile phones and tablets and now on desktop computers and older Xbox hardware.

Microsoft plans to release streaming sticks and smart TV integration, so all you’d need is a television and a controller. For Game Pass users, this model ensures they don’t risk buying software they won’t be able to access elsewhere, because it all runs on Xbox devices and through Microsoft’s infrastructure and because it’s all bundled in one neat subscription. Game Pass now has 25 million subscribers, Microsoft announced last month.

Nvidia, which has been slowly building a cloud service since way back in 2015, took a unique approach in that it targeted not casual players or those who didn't own hardware, but gamers who already had a library of titles on Valve’s Steam marketplace. Nvidia’s service charges a subscription fee to access its platform without any restrictions, and it includes games purchased elsewhere, so long as the developer agrees to let Nvidia stream the game from a remote server. (Nvidia ran into some licensing trouble early on in this regard, but it quickly moved to an opt-in model that let developers decide if they wanted to integrate with GeForce Now.)

The company most recently launched a RTX 3080 tier for $200 per year that has best-in-class performance, outpacing offerings from Amazon, Google and Microsoft and setting a high bar for cloud gaming latency and visual fidelity.

The GeForce Now model is in many ways the ideal cloud gaming model. It targets consumers who want to take their existing library with them on the go, while also appealing to the smaller but fast-growing audience of players who simply don’t want to buy a gaming PC but who still want to play Steam games on their Mac laptop, smartphone or dated Windows machine. Microsoft’s approach, while still early, could turn Game Pass into a major cloud gaming force once a steady stream of new games from its subsidiaries starts flowing onto the platform and once Microsoft catches up to Nvidia’s server performance.

But Stadia now lags well behind both competitors in the games it offers, the attractiveness of its business model, in-game performance and the long-term viability of the platform. “I don’t think that anyone has any doubt the gaming experience can be good,” Fernandes said of cloud gaming as a whole. “The doubt is more in how fast are people willing to change their mindset and commit to this big transition. So far, people are still concerned.”

One potential direction for cloud gaming in the near term is a shift away from do-everything consumer models offered by large tech firms and toward enterprise offerings. These are taking shape as white-label services for big game publishers to launch their own cloud products and smaller, more niche services tailored for specific markets, often by partnering with internet service providers.

This is already the model favored by companies like Ubitus and Gamestream, which have been building their businesses by helping publishers create cloud gaming ports for platforms like Nintendo Switch and partnering with telecoms to offer cloud gaming on mobile in developing markets. These are parts of the world where console hardware and expensive gaming PCs are dwarfed by the number of people who rely solely on their smartphone for all their internet and entertainment needs.

“We’re not at all the competition with the [consumer] players. We’re targeting casual gamers. We don’t target hardcore gamers with these services,” Lebeau said of Gamestream’s offerings. “We are providing a service to the publishers as well, so the publishers can reach and provide a streaming service to their fans by providing a demo which has been set up for Gamestream.”

Gamestream recently partnered with Ubisoft to become a white-label service provider for the French publisher, so it may one day launch a cloud service under its own brand. The company also teamed up with French publisher Focus Entertainment to make developer Asobo Studio’s A Plague Tale: Innocence available as a streaming demo, so players could try it on PC without paying or downloading anything.

Even Google is now in the early phases of pivoting Stadia into an enterprise service offering.Illustration: Christopher T. Fong/Protocol

“We are following respectfully what Netflix is doing in those countries,” Lebeau said of Gamestream’s approach. “We’re looking at price and strategy and what’s successful.” Lebeau said his company has learned how to tailor services for various markets by partnering with telecoms in India and Indonesia, where mobile gaming dominates but not everyone has either the latest and greatest smartphone or a device with enough storage to download and play premium mobile games.

In that context, gamers are less interested in using the cloud to play Cyberpunk 2077 on a MacBook and more interested in, for instance, using a 3- or 4-year-old Android phone to play the latest Genshin Impact update. Lebeau said that by partnering with telecoms, they’re able to plant their equipment within the carriers’ infrastructure to reduce latency and improve performance, instead of renting space in faraway data centers or building their own. “We provide all the content, we provide the service, we don’t have to spend any money on marketing, hosting and we do a revenue share,” Lebeau said.

Even Google is now in the early phases of pivoting Stadia into an enterprise service offering. Insider reported earlier this month that the company has begun pitching a new product, Google Stream, as a white-label service for game developers like Capcom and Bungie and even non-gaming firms like Peloton. The consumer product, on the other hand, has been “deprioritized,” the report said.

"We announced our intentions of helping publishers and partners deliver games directly to gamers last year, and have been working toward that,” a Google spokesperson told Insider. "While we won't be commenting on any rumors or speculation regarding other industry partners, we are still focused on bringing great games to Stadia in 2022. With 200+ titles currently available, we expect to have another 100+ games added to the platform this year, and currently have 50 games available to claim in Stadia Pro." Google points to AT&T's browser-based Batman: Arkham Knight port and Peloton's new streamable Lanebreak game as examples of its white-label efforts showing promise.

This white-label approach makes sense as the cloud gaming market starts to mature and a lot of the growth outside Game Pass and GeForce Now concentrates on the enterprise side. Newzoo reported that cloud gaming revenues in 2021 reached $1.6 billion, with more than 23 million players either subscribing to or accessing some form of cloud service last year.

“I think we’re still in the experimentation phase,” Newzoo’s Fernandes said. “The competition is becoming a lot more intense in the cloud gaming space. So we can expect some consolidation both from maybe some of the smaller services shutting down, like with Magenta, also maybe some acquisitions.” Last year, Unity bought enterprise streaming platform Parsec, and Intel bought RemoteMyApp.

Fernandes said there’s plenty of evidence suggesting cloud gaming will continue to grow this year and for many years to come, despite the headlines around Google’s efforts and the lack of mainstream adoption from core console and PC gamers over the past few years. “Stadia is an isolated case. There were some issues with how the service rolled out, the marketing and so on,” he said. “But if we look at how the other services are performing and what we expect to see in the future, just because Stadia isn’t doing well, that doesn’t mean cloud gaming doesn’t have a bright future ahead.”