The market may need more details on Alphabet's (GOOGL) first major foray through its "Netflix (NFLX) of gaming."
Shares of the GOOGL held relatively flat in pre-market hours as many await more details on how exactly the new program will disrupt the nearly $150 billion video game industry.
Sizing Up 'Stadia'The new cloud gaming service, dubbed Stadia, was unveiled on Tuesday at Google's Game Developer Conference in San Francisco. The new service is aimed at delivering a one stop shop for gaming that will move the gaming industry beyond the hardware bases that Microsoft's (MSFT) Xbox and Sony's (SNE) PlayStation currently dominate.
Tried to speed run your way through our big announcement today?��♂️��
We'll save you the time. Watch our recap here. https://t.co/YTJVLfx6Ul
— Stadia (@GoogleStadia) March 19, 2019
The only piece of hardware in play will be a controller, compatible with the company's popular Chromecast streaming plug in.
Classic Google: Konami code listed on the bottom of the #Stadia controller. Very nice touch. pic.twitter.com/RNdWhmyNPi
— Eli Blumenthal (@eliblumenthal) March 19, 2019
The lack of disks, downloads, and clunky hardware is aimed at allowing greater access to games that the company's streaming service offers. The change also makes the company's products available across mediums including phones, laptops, tablets, and televisions
Yet, the initiative moves beyond simply a streaming service.
The company will also delve into game development for its platform, allowing users and indie game producers to contribute alongside its Stadia Games and Entertainment studio.
Still, many analysts expect that the company will also incorporate major game developers like Take-Two Interactive (TTWO) , Electronic Arts (EA) , and Activision Blizzard (ATVI) to populate the platform instead of trying to compete directly.
Nonetheless, full details on the strategy to secure gaming rights on the platform were not disclosed.
Utilizing YouTubeOne of the key existing aspects of Alphabet is YouTube, a massive video platform only eclipsed by Facebook (FB) in terms of global audience.
The service was highlighted as a linchpin that will allow gamers to seamlessly transfer from watching their favorite video game streamers play to actually playing the game they were watching through the Stadia platform.
"The Assassin's Creed demo highlighted the ability for a user to click a "play now" prompt on Ubisoft's official YouTube channel and be inserted into the game within 5 seconds, including the ability to move between devices with minimal friction," Baird analyst Colin Sebastian observed. "Over 200 million gamers come to YouTube daily to view streamed content (averaging ~40 minutes/day), and we believe Google will leverage YouTube's user audience/content creators to help developers reach a broader swath of gamers."
Still, the effort to capitalize on video game streaming would bring the company into competition with the Amazon (AMZN) -owned streaming service Twitch, which currently dominates the market for game streaming.
The stickiness of that platform as Google attempts to poach players will remain a question mark, especially if Amazon is to attempt to launch a rival service. Additionally, Microsoft's xCloud effort that remains in development could serve to further crowd the space.
Questions RemainThe Amazon aspect is far from the only question.
The novel idea from Alphabet has certainly generated excitement, but the company's decision to hold its cards tight to the vest until the summer is a cause for caution among many investors.
"Details on the pay model were not disclosed, and while multiplayer games were discussed at length, a full play session was not shown," Piper Jaffray analyst Michael Olson pointed out. "Further, the only major publisher highlighted at the Google event was Ubisoft."
The lack of clarity on a subscription versus a pay by purchase model is leaving many on the sidelines on Wednesday as the summer approaches.
"No announcements were made on initial content availability, pricing, or distribution fees for developers," KeyBanc Capital Markets team of technology analysts added. "The key question that went unanswered was related to technical requirements. Google did not highlight broadband or wireless capacity to successfully operate the service. Although we came away very impressed by the rollout, we believe internet speed could remain a material bottleneck for global adoption."
The bottleneck could stand to intensify as Google gears up advances in resolution for its services.
"The technical specifications of the platform left us in awe," the Action Alerts PLUS team commented in their review of the presentation. "Not only has the platform been successfully tested running games at 1080p resolution and 60 frames per second (FPS), at launch (later this year) it will be able to run at 4K (and support simultaneous game streams). What's more, in the future, management says the platform will be able to run at up to 8K resolutions at speeds of 120 frames per second. For some perspective, resolution of 1080p to 4K with a 30 - 60 FPS is about what one can expect on today's top-of-the-line gaming consoles such as the PS4 Pro and Xbox One S, so the fact that Alphabet is able to hit these numbers on a streaming platform is a statement as to how advanced the platform is and what it can do to disrupt the space."
While that is certainly a positive for those demanding a perfect picture to play on, it is exceptionally taxing on internet provision. That creates a problem across markets that are somewhat underdeveloped in that respect and tamps down the adoption of the product across markets that products like YouTube currently court.
Lastly, many investors are concerned that this is another Google project intended to capitalize on a major secular trend without proper consideration as to penetration of the prospective market. Google Plus, the now abandoned social media effort, is the primary corollary to the criticism.
So, while the opportunity is certainly there, many investors seem happier to wait until the summer shines a bit more light on the project before warming up to the catalyst.
(Alphabet, Amazon, Facebook, and Microsoft are holdings in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells GOOGL, AMZN, FB or MSFT? Learn more now.)
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