The company behind the cloud gaming platform Shadow has filed for bankruptcy in the U.S. and receivership in France, according to 9to5Google. Shadow recently posted an update to its blog confirming that it was undergoing a “reorganization” to get rid of the debt it had amassed building its cloud gaming platform in several countries.
Shadow, which is owned by a France-based company named Blade, said the covid-19 pandemic caused such an increase in demand it couldn’t keep up, making the cloud service “a victim of its success.” Gizmodo recently spoke with Shadow about the future of cloud gaming and 5G, and the company described how it was struggling to keep up with demand. Shadow cited its long subscriber waiting list and difficulty getting access to the hardware components it needed, like graphics cards, to build more servers to increase capacity. Still, the company believes it can turn things around—with the right investor.
“Shadow’s potential has never been greater—we now need to make sure it becomes a reality by regaining new, sturdy financial grounds to build a sustainable and profitable business,” the company said in its blog post announcing the reorganization.
When Gizmodo spoke with Shadow Vice President of Consumer Business Florian Giraud in February, he said the company was working to obtain more financing so that Shadow could scale faster and get more users off its waitlist. Shadow doubled its U.S. user base in 2020 alone and also started expanding to South Korea, but Giraud said the company was being cautious not to “scale too rapidly.” It appears scaling faster than it already was would have caused the company to take on even more debt than it already amassed.
Gizmodo reached out to Shadow for additional comment, and the company was pretty candid with what transpired.
“Shadow has been less successful in building a profitable business: developing this amazing product turned out to be more expensive than expected—with debts now holding us back,” Giraud told Gizmodo via email. “As a result, Shadow lacks funding and financial margins to invest more and meet a rapidly growing demand for our service.”
However, despite the bankruptcy proceedings, Giraud said that potential investors have expressed interest in acquiring and investing in the company, and that “the selection process has started and should last a couple of weeks.”
As Gamesindustry.biz noted, France-based server manufacturer 2CRSi currently has a hold on €30.2 million ($38.1 million) worth of hardware that Shadow uses in its cloud servers. The hold will last until “all lease payments or installments are paid by Blade,” said 2CRSi in a recent press release announcing it would start legal proceedings against Shadow’s parent company to recover that hardware.
“Given the shortage of electronic components and more specifically graphics cards since the end of 2020, there is a strong demand on the market for this type of equipment and 2CRSi has already received indications of interest from several customers for the servers involved,” said 2CRSi.
That may sound scary, but for current Shadow subscribers, nothing changes at this time. Users can keep accessing the service like usual, but anyone who has been waiting for a Shadow Ultra or Shadow Infinite subscription are going to have to wait a while longer before those subscription options will be available.
“While we await for new ownership, the release of these new configurations is put on hold for now,” Shadow announced. “We will update you when we have information to share.”
The company has provided a full FAQ to answer subscribers’ most common questions.
While Shadow is mainly known as a cloud gaming platform, it does things differently than the likes of Google Stadia and Nvidia’s GeForce Now. It allows users to rent an entire virtual PC for a monthly fee, so not only can you install any game you want on it to play, you can run other programs like Adobe Premiere Pro, AutoCAD, or anything else that would benefit from a high-end PC.
But on the gaming side of things, Shadow doesn’t suffer from one of the major pitfalls of cloud gaming at the moment: content. Because it provides an entire PC in the cloud, users can install any game from their Steam, Epic, GOG, Origin, and other libraries on it. To play a game on GeForce Now, it has to be compatible with the platform. The play a game on Stadia, you have to purchase it from its store—or pay $10 a month for Pro and hope it’s free.
However, Nvidia and Google have the advantages of providing their own capital and equipment to keep their cloud gaming servers running. For a platform like Shadow that relies on investors and leasing equipment to keep people connected to their virtual PCs, it’s clearly much more difficult to stay afloat.