The U.K.'s biggest internet provider hopes to boost its broadband revenue by targeting speed- and data-hungry gamers with a new bundle that includes Google LLC's Stadia cloud gaming service. It is the first European distribution deal for Stadia.

As part of an agreement announced Jan. 17, British Telecom is offering the Google Stadia Premiere Edition to customers on three of its high-end fiber and top-speed broadband plans, with prices starting from £40 per month. Analysts say the partnership provides a new avenue for BT to lure in tech-hungry gamers to its pricier broadband plans, while Google scores a wider audience for its new cloud gaming platform.

Stadia debuted to a muted launch in November 2019, with some gaming analysts criticizing Stadia's lack of launch titles and limited features. Google has tried to fix some of the initial concerns since then, announcing more than 120 new games, including 10 exclusives. The Stadia Premiere Edition bundle that will be accessible for BT customers has a Google Chromecast media player to support the gaming platform and Google's custom-made controller. It also includes three-months access to the Stadia Pro subscription tier, which includes the ability to play in 4K and discounts on titles.

The telecommunications industry's leading companies already offer video, music and live sports services to entice customers to sign lengthy contracts. Cloud gaming appears to be the next big opportunity for competitors in add-on entertainment options, said Richard Broughton, a research director at media markets firm Ampere Analysis with experience analyzing the television, film and communications industries. Broughton pointed to the BT deal and Vodafone Group PLC's partnership with mobile gaming platform Hatch as examples of the move to cloud gaming.

Sales of games in the U.K. fell 3.4% year over year to £3.77 billion in 2019, breaking a seven-year streak of gains, according to the Entertainment Retailers Association, a trade group for the music, video and videogame industries. The decline was largely due to the console market's maturity, with popular consoles such as Sony Corp.'s PlayStation 4 and Microsoft Corp.'s Xbox One reaching the end of their life cycles. In comparison, spending on online and mobile games grew by 1.1% to £3.17 billion. Upcoming launches of new hardware from Microsoft and Sony are expected to put game sales back on a growth trajectory.

Capitalizing on cloud gaming could boost the average revenue per customer, or ARPC, for internet service providers, noted George Jijiashvili, senior analyst at tech consulting firm Ovum. "The gamer demographic is particularly attractive … as they are among the highest-spending digital consumers," Jijiashvili said. BT's consumer-fixed ARPC was £38.5 for the half-year to Sep. 30, 2019, or flat year over year, while postpaid mobile ARPC slipped 5.5% to £20.8. By subsidizing Stadia, BT is seeking to add more value to its premium internet contracts and to appeal to casual gamers put off by the high price of consoles and PCs, said Giulio Sinibaldi, an analyst at telecom research firm Analysys Mason.

For Google, the BT bundle could result in subscriber gains, which it needs to justify its investment in cloud gaming, Broughton said. With BT, Stadia enters Europe's second-biggest gaming market by leveraging an existing customer base from a leading telco, Sinibaldi said.

A BT spokesperson said the company's fastest broadband plans, which start at speeds of 67Mbp, are recommended for data-heavy platforms such as Stadia. Google recommends a network speed of 10 Mbps or greater to play Stadia and at least 35 Mbps or greater to play in 4K resolution.

Cloud gaming revenue has grown slowly in recent years but is set to explode from $416.7 million in 2019 to $3.61 billion in 2023, following the launch of new services from companies such as Google and Microsoft, according to Kagan, a media market research group within S&P Global Market Intelligence.

Full-fiber broadband is facing its own rollout hurdles in the U.K. The next-gen internet network, with faster gigabit-capable speeds, was in 10% of households as of late 2019, according to media regulator Ofcom. Despite the government's pledge to expand fiber broadband to all homes and businesses by 2025, the telecom industry says more regulatory clarity is needed. Ofcom has promised to set a five-year roadmap for full-fiber investment, including rules governing access to BT's infrastructure for other internet providers, by April 2021.