May 20, 2019 12:30:00

What happens to the PlayStation in a strategic partnership between Sony and Microsoft?

by

Lucas Ortiz

Sony entered into a strategic partnership with Microsoft on cloud gaming and AI, and surprised not only the gaming industry but also many people. However, overseas media said that the biggest impact was employees working in Sony's PlayStation division, which has fought with Microsoft in the $ 38 billion US stationary game console market. Bloomberg reports.

Sony's Deal With Microsoft Blindsided Its Own PlayStation Team-Bloomberg
https://www.bloomberg.com/news/articles/2019-05-19/sony-s-deal-with-microsoft-blindsided-its-own-playstation-team

On May 16, 2019, Sony, which develops PlayStation, and Microsoft, which develops Xbox, announce that they have entered into a strategic alliance in cloud-based solutions for games and artificial intelligence (AI) -based solutions. did. The contents of the announcement on the partnership are covered in detail in the following article, so it is possible to imagine in what part the two companies will cooperate.

Sony and Microsoft have strategic alliance in cloud gaming and AI field, new platform for developers-GIGAZINE

The PlayStation division has spent over seven years developing its own cloud gaming service, PlayStation Now , but with only limited success, Bloomberg notes. The talks for a strategic partnership between Microsoft and Sony began in 2018, and sources familiar with the issue said that the partnership “directly by senior executives working at Sony in Tokyo without the involvement of the PlayStation division. It was processed. Therefore, it seems that it was the coverage of 'water on the back' for the PlayStation staff. According to sources, it seems that the field was so loud that managers have to calm down staff and guarantee that 'a strategic alliance will not affect the development plan of the next-generation console'.

'This is part of the painful lessons that Sony and many other technology companies will face as the world's leading cloud computing provider (in this case Microsoft) becomes more powerful. There is, 'says Bloomberg. 'We can not catch up with companies like Microsoft,' unless you spend hundreds of billions of dollars each year on data centers, servers, and network devices.

With the speeding up of the Internet, it has become possible to realize a system that processes various games on the cloud and streams video to smartphones and PCs. These ' cloud game ' services are just a threat to PlayStation, which generates approximately one-third of Sony's revenue. As Microsoft is developing the world's most popular stationary game console called Xbox, it can be said that it faces the same crisis. However, Microsoft has the second-largest cloud service Azure in the industry, so it can be said that the transition to cloud gaming is better than PlayStation.

In fact, Microsoft has announced 'Project x Cloud', a game streaming service that enables game play from any device at any time.

Microsoft announces the service 'Project xCloud' which can play the game by streaming from any terminal anytime-GIGAZINE

Also, as with Microsoft, Google, which provides the industry's leading cloud service, has announced a cloud game service called Stadia. In addition, Amazon, which also provides a major cloud service, is rumored to be planning its own cloud game service.

Google announces its own cloud game service 'Stadia', details of the services that Google will release in full power-GIGAZINE

Kenichiro Yoshida, president and chief executive officer of Sony, found it difficult to tackle cloud game services planned by these cloud-friendly companies with his company's own cloud game service, and with one of Microsoft's rivals, Microsoft Bloomberg says, 'I was forced to form a partnership.'

'Sony feels threatened by the wave of cloud games and Google's ability to be a strong competitor,' Amir Anvarzadeh, a strategist at Asymmetric Advisors, decided to let Microsoft build the network infrastructure to Microsoft It does not seem to work with the competition otherwise, ”he told Bloomberg.

According to Bloomberg, a Sony spokesman said that talks with Microsoft had begun in 2018, but did not provide much more detailed information.

Sony acquired the US startup Gaikai for $ 380 million (¥ 42 billion) in 2012 and became the first giant game maker to enter the cloud game market. In 2015, we released PlayStation Now, a cloud gaming service that attracted 700,000 paid members. But 'complaints about poor connectivity continue,' said Bloomberg, and David Cole, CEO of DFC Intelligence, a research firm specializing in the gaming industry, also said 'Playstation Now is a very limited service.' Point out.

The PlayStation Network, a major source of revenue for Sony's online gaming services, is hosted by AWS, which Amazon offers at the time of writing. Sony said it had discussed talks with Amazon on a cloud game partnership in 2018, but sources say the two companies did not reach an economic agreement. As a result, Sony said it was in consultation with Microsoft, sources say. According to a source, Sony has made important personnel changes, such as moving PlayStation Now's development staff to other divisions, in a strategic alliance with Microsoft.

Many analysts believe that the partnership with Microsoft will act as a positive thing for Sony, at least in the medium and short term. However, cloud games are still in the process of rising, and according to research firm IHS Markit, it is analyzed that they account for only 2% of the game industry's total sales by 2023. So Sony and Microsoft are both developing next-generation stationary game consoles.

by Sean Whelan

However, some analysts pointed out that Sony could be a loser in the long run. At the time of writing, PlayStation is collecting up to 30% of sales as an incentive from major publishers such as Electronic Arts and Capcom, but if the cloud game spreads, it has to compete with Microsoft and other companies, in which case Sony It is expected that it will be difficult to compete in terms of technology and price.

According to IHS Markit's Head of Game Research, Piers Harding-Rolls points out that securing a monopoly title will continue to be an important issue for Sony, no matter how and when cloud games are launched .