Following Microsoft and Sony’s surprising announcement of a cloud gaming partnership last week, Bloomberg has a bit of behind-the-scenes analysis that uses unnamed insider sources to explain how the deal came about.
Though Sony confirmed to Bloomberg that talks between the two console giants had been going on since last year, the announcement still caught rank-and-file employees at Sony off guard, according to Bloomberg’s sources. “Managers had to calm workers and assure them that plans for the company’s next-generation console weren’t affected,” as Bloomberg summarizes the view from inside the company.
Sony has already spun its 2012 purchase of streaming gaming company Gaikai into over 700,000 subscribers for its cloud-based PlayStation Now service, which launched in 2015. But Sony’s server and network infrastructure has proven insufficient to provide the “as good as local” experience promised (but yet to be proven) by major competitors like Google’s recently announced Stadia service. That led Sony to reach out to other companies with more established cloud infrastructure to expand its streaming gaming footprint.
Bloomberg’s sources suggest that Sony was at one point discussing expanding its cloud gaming ambitions through Amazon Web Services, which already hosts the infrastructure for PlayStation Network’s online gaming. One person “familiar with the matter” told Bloomberg the two companies “couldn’t agree on commercial terms” for the deal. Amazon is planning to launch its own cloud-based gaming service soon, according to a January report from The Information.
Cloud-based gaming seems to have captured the imagination of investors across the gaming industry; Sony’s stock price jumped nearly 10 percent on Friday, its biggest one-day gain in a year and a half. But Bloomberg notes that analysts at IHS Markit still expect cloud gaming to represent just 2% of game industry revenue by 2023. That’s one large reason why this partnership, as surprising as it is, probably doesn’t mean much for the immediate future of the console wars.
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