Cloud Gaming Today: Why OnLive and Stadia Failed but Xbox Survived
How cloud gaming works, why OnLive, Gaikai, and Google Stadia stumbled, how Xbox Cloud Gaming and GeForce Now survive, and why latency matters.
"You don't need a console anymore. As long as you have internet, you can play the latest games on any device." Cloud gaming has been making this promise for over 20 years: that you can enjoy the latest games on a smartphone, a TV, or an old laptop, without a high-end graphics card or an expensive console.
But that promise has fallen apart several times. Highly anticipated services shut down, while some survived with the backing of big companies. In this post, we look at how cloud gaming works, why the early services failed, and which services are running today and how.
How Does Cloud Gaming Work?
Cloud gaming runs the game not on your device but on a server in a distant data center. The process goes roughly like this:
- The game runs on the server, which produces the picture and sound.
- The server compresses (encodes) the picture as video and sends it over the internet.
- Your device decompresses (decodes) the incoming video and shows it on screen.
- When you press a button on your controller, the input is sent back to the server and reflected in the game.
Put simply, it's like watching "a video you can control in real time." So your device only needs to be powerful enough to play video, and there's no need to install games or wait for updates.
Cloud gaming services fall into three broad types.
| Type | Description | Examples |
|---|---|---|
| Game library subscription | Play a lineup of games chosen by the service for a subscription fee | Xbox Cloud Gaming, PlayStation Plus Premium |
| Bring your own games | Run PC games you already bought on a remote server | GeForce Now |
| Remote PC rental | Rent a single Windows PC in the cloud | Shadow |
The Biggest Enemy: Latency
What determines the quality of cloud gaming is latency: the time it takes for a button press to travel to the server and for the processed picture to come back. A movie can start a few seconds late without any problem, but in a game you notice right away if the response to a button press is even slightly delayed.
Latency is especially fatal in shooters and fighting games that require precise input. Turn-based games, puzzle games, and relaxed adventure games, on the other hand, can be enjoyed fairly comfortably even with some latency. This is why the cloud gaming experience feels so different depending on the genre.
There are other problems besides latency.
- Stable high-speed internet: Receiving smooth, high-quality video requires a fast, stable connection.
- Data usage: High-quality streaming uses a lot of data, which is a burden on plans with data caps.
- Server costs: A server GPU has to be allocated to each user, so the operator's cost structure is completely different from traditional game sales.
Early Attempts: G-cluster and the Phantom
The first company to publicly demonstrate cloud gaming was G-cluster, which showed off its technology at E3 in 2000. G-cluster later shifted to partnering with telecom IPTV services, leading to TV gaming services with French carriers SFR (2010) and Orange (2012).
In 2003, Infinium Labs in the US announced the "Phantom," a console that would download games via monthly subscription. The company showed a prototype, but it went bankrupt in 2008 before the console could launch, and the Phantom remains a famous piece of "vaporware" (a product announced but never released). Crytek, the developer of Crysis, also began researching cloud gaming in 2005 but stopped in 2007, saying internet infrastructure wasn't ready.
OnLive and Gaikai: The First Boom
Cloud gaming first drew serious attention in 2009. Entrepreneur Steve Perlman unveiled OnLive at the Game Developers Conference (GDC) in March 2009, and the service launched in June 2010 along with a small dedicated console. Features like trying games instantly without installing them and spectating other people's play were well received. But picture quality and input lag varied with internet conditions, and many said fast-paced games felt sluggish.
Around the same time, Gaikai, founded by David Perry, chose to stream game demos instead of full games. It approached streaming as a kind of advertising tool, which won it support from more game companies.
The outcomes diverged. OnLive never turned a profit, and in 2012 its assets were sold off cheaply to another company. Gaikai, on the other hand, was acquired by Sony in July 2012, and its technology became the foundation for PlayStation Now, launched in 2014, and Remote Play on the PS4. In April 2015, Sony also bought OnLive's patents and then shut down the OnLive service, effectively securing a whole set of cloud gaming patents at once.
Big Tech Joins In, and Stadia Fails
Around 2018, big tech companies jumped in one after another. Google tested "Project Stream," which ran Assassin's Creed Odyssey in the Chrome browser, and Microsoft announced "Project xCloud," built on its Azure cloud.
Google officially announced Stadia at GDC 2019 and launched it on November 19 of the same year. It promoted ambitious features such as streaming at up to 4K and 60 frames per second, YouTube integration, and the ability to jump straight into a game from a save point shared by another player.
But Stadia didn't last long.
- There weren't enough games. Apart from some free games, titles had to be bought separately from the Stadia store, and the most common criticism in early reviews was the thin game lineup.
- Promised features arrived late. Early reviews widely criticized the absence of features that had been promised at launch.
- It gave up on in-house game development. Google closed its own game studios in February 2021.
In the end, Google announced the shutdown in September 2022, and Stadia closed on January 18, 2023. Google refunded hardware and game purchases and released an update allowing Stadia controllers to be used as Bluetooth controllers. Stadia's failure left the lesson that technology alone isn't enough; you also need the games players want and a purchasing model they can accept.
The Services That Survive Today
Even after Stadia's demise, cloud gaming continues in several forms.
Xbox Cloud Gaming
After a trial period starting in November 2019, Microsoft began offering cloud gaming at no extra cost to Xbox Game Pass Ultimate subscribers on September 15, 2020. The biggest difference from Stadia is that, instead of selling cloud gaming separately, Microsoft made it one of the benefits of an existing subscription. Its servers used modified Xbox console hardware, and starting in June 2021 they began switching to servers based on the Xbox Series X.
GeForce Now
NVIDIA's GeForce Now runs "games you already own" in the cloud. It started in 2013 as "NVIDIA GRID," was renamed GeForce Now in 2015, and officially launched on February 4, 2020. Because you link games bought on Steam or the Epic Games Store, there's no need to buy them again. Early on, however, some publishers objected that their games were being offered in the cloud without permission, and those games were removed from the lineup. In Korea, the service is provided through a separate site (GFN.CO.KR).
PlayStation Plus Premium
In June 2022, Sony merged PlayStation Now into its PlayStation Plus subscription service. At the highest tier, "Premium," players in some regions can stream selected games from PlayStation 1 through PS5. In regions without cloud streaming, there is a "Deluxe" tier that excludes streaming.
Other Services
- Amazon Luna: Launched by invitation in October 2020, it integrates with Twitch and offers games through channel subscriptions.
- Cloud versions on Nintendo Switch: Games that would be hard to run on Switch hardware, such as Control, Hitman 3, and the Kingdom Hearts series, have been released as cloud versions. In Japan, Dragon Quest X was also offered via the cloud on the Nintendo 3DS in 2014.
Platform Policy: Another Barrier
Besides technology, platform policy has also held cloud gaming back. In mid-2020, Apple tried to block cloud gaming apps from the App Store, on the grounds that games delivered through the cloud bypass Apple's review of individual apps. It changed its rules in September 2020 to allow them, but with the condition that each game be submitted as a separate app.
As a result, GeForce Now, Stadia, and Xbox Cloud Gaming chose to serve iPhone and iPad users through web apps that run in a browser like Safari instead of native apps.
The Future of Cloud Gaming
The early prediction that cloud gaming would completely replace consoles has not come true yet. Instead, the cloud is settling in as "one more option."
- Try before you install: You can try a large game instantly in the cloud before downloading it.
- Continue on a second device: Play on a console at home and pick up the same game on a smartphone or laptop when out.
- Make up for weaker devices: Even old PCs and handhelds can run demanding games.
On the technical side, research is under way on ways for multiple users to share a single server GPU efficiently and on predicting a player's next input to reduce perceived latency. Meanwhile, the problem of losing access to games when a service ends, in other words the question "do I really own the games I bought?", has become more important since Stadia.
In short, the success or failure of cloud gaming has depended less on technology than on "which games you can get, and how you pay for them." Services that connected naturally with existing subscriptions or games players already owned survived, while services that tried to build a new ecosystem from scratch struggled. Games like puzzles, where thinking matters more than reaction speed, are less sensitive to latency, so they are often seen as a good fit for the cloud.