its not like a brand new situation that developed right after Google announced Stadia
No, but it’s telling that one of the world’s richest companies ran into this problem. It’s pretty typical of Google to be arrogant and not understand the market they were trying to break into. Also typical of them to give up when it turned out to be a hard problem to solve. But, still, they chose to give up rather than make what (for them) would have been a reasonably small investment to buy a few AAA studios.
It seems to me that to have been successful in this attempt they would have either had to become a major console manufacturer with their own exclusives (maybe not a market they wanted to be in) or to be the junior partner working with another console manufacturer, where they controlled the server side and the other company controlled the client-facing and studio-facing side. But, Google rarely does partnerships like that. You’re right that it really seems like they didn’t go into it with their eyes open. They seemed to just arrogantly assume that their technological superiority would be enough to disrupt consoles without having to do what everybody else did.