Microsoft and Sony Tie Up to Enhance the Future of Cloud Gaming

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by Wanguba Muriuki · 4 min read
Microsoft and Sony Tie Up to Enhance the Future of Cloud Gaming
Kenichiro Yoshida, President and CEO, Sony Corporation (left) and Satya Nadella, CEO, Microsoft Corporation. Photo: Sony Global

Microsoft and Sony merge to fight competition from Amazon and Google in the provision of cloud gaming services that are expected to take the gaming world by storm in the near future.

Sony and Microsoft unveiled a surprising partnership. The pact between the two giants will see them collaborate to develop future cloud solutions for game and content-streaming services. These companies have spent over 15 years battling it out over Xbox and PlayStation sales. Thus, their partnership has surprised the entire gaming industry including employees of Sony’s PlayStation division. The PlayStation team was unaware of these discussions.

Talks have been going on between the companies since last year. The PlayStation brand has spent years fighting the software giant in the $38 billion video game console industry. Sony seeks Microsoft’s immense cloud experience to assist in powering its current and future streaming services. On the other hand, Microsoft decided to team with its rival to keep ahead of larger gaming threats.

The strategic partnership will see the companies co-develop same streaming technology. Also, some of PlayStation’s online services will appear on Microsoft Azure cloud platform. The move may have come due to PlayStation spending seven unsuccessful years developing a cloud gaming service.

However, experts believe that the partnership was prompted by one thing in particular: Google’s launch of its Stadia cloud streaming service. Google plans to leverage its YouTube platform to enable users to click and immediately play games on their phones or browsers. The ease of use and Google’s web dominance has unnerved Sony and Microsoft.

Microsoft, Google, and Amazon are among the few brands with adequate cloud experience and server power. They have the capability to make cloud gaming a reality in years to come. Reducing latency is integral and it needs having servers near players in many cities worldwide. These three giants have already started making this significant investment while Sony is unable to do it hence the partnership.

Details of the Deal

Sony preferred Microsoft over Amazon and Google since the latter two companies plan to invest in the online gaming industry. The deal could have been simply to host Sony’s services on Azure. However, the agreement appears deeper. A statement from Microsoft read that:

“The two companies will explore joint development of future cloud solutions in Microsoft Azure to support their respective game and content-streaming services.”

The merger will fight Google Stadia and any cloud streaming service Amazon wants to launch. There might not be any cloud streaming service for Xbox and PlayStation games. However, it could mean that the underlying server hardware could be the same in the future to make it easier for the developers to create titles for both of these services.

Currently, Microsoft and Sony have no cloud-native streaming services. But, they are compiling Xbox One S and the PlayStation 3 hardware into data centers. Thus, they will have the capacity to offer a large game library from their cloud streaming services. Developers will not have to do anything for their games to run off a server. But it is harder to scale it over time.

Market Reactions

Kenichiro Yoshida, the Sony Chief Executive Officer realized that his company’s home-grown cloud service will not cut it. Hence, he chose to collaborate instead of confronting his old gaming nemesis. According to Amir Anvarzadeh, Asymmetric Advisors strategist:

“Sony feels threatened by this trend and the mighty Google, and has decided to leave its network infrastructure build-up to Microsoft. Why would they sleep with the enemy unless they feel threatened?”

Sony shares surged 9.9% on Friday, the most gain in 18 months. Additionally, the company announced a record share buyback on the wake of that partnership announcement. However, analysts believe that Yoshida’s speed in response to a shifting video-game industry to be a significantly positive factor. The ‘new Sony’ shows that management is adapting rapidly to changes.

Share prices changed quite a little during the Monday trading sessions. Sony shares are currently trading at 5,610.00JPY while those of Microsoft are trading at 126.22USD.

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