Charting the ripple effects of Sony's cloud-gaming acquisition

What does Sony's Gaikai purchase mean for the gaming, TV and mobile industries?

It happened a little later than the rumours predicted, but Sony has indeed gone shopping for a cloud gaming service. With its purchase of Gaikai, announced overnight, Sony has potentially disrupted the nascent cloud gaming market, and also added an interesting wrinkle to its own competitive fortunes across platforms.

A few thoughts on how this acquisition will affect the various players.


(Credit: CBS Interactive)

The other, arguably better-known, cloud gaming service OnLive was another rumoured Sony target. Presumably, Sony's done cloud shopping, but other suitors, namely Microsoft, could still be interested.

Seventeen months ago, VentureBeat reported that analysts estimated that OnLive was worth roughly US$1.8 billion. As EuroGamer pointed out, such a price makes Gaikai seem like a bargain at its US$380 million acquisition price. I would expect that price to have a negative impact on any OnLive price tag.

OnLive may also find itself with increased leverage as a result of this deal, depending on the fate of existing Gaikai partnerships. Samsung and LG both had agreements to stream games to televisions via the Gaikai service. Electronic Arts had also apparently snubbed OnLive for Gaikai, granting the latter sole access to titles like Dragon Age 2, Mass Effect 3 and the Dead Space series. Contract language might inhibit any immediate realignment, but OnLive might find that those doors have reopened. (Although, set top boxes notwithstanding, I'm still waiting for Vizio's promised OnLive-integrated TVs.)


(Credit: Microsoft)

Valuations being dynamic things, both the passage of time and the Gaikai deal will affect any OnLive price tag. Still, not least because of its roughly US$60 billion war chest, Microsoft could scoop up OnLive for any reasonable amount.

But does Microsoft need or want OnLive, or a similar cloud gaming service?

First, Microsoft already has its own cloud computing infrastructure in Azure, which, like Gaikai and OnLive, can also deliver interactive 3D content.

Further, speaking at GDC China last year, Microsoft cloud evangelist Brian Price said, "Another problem [with console-quality gaming via the cloud] is that your gamers need high speed internet access. That's fine if you live in a city, but most of America doesn't live in a city, for example." Those bandwidth inconsistencies argue against a major cloud-based shift in the next console generation.

It's still possible that OnLive offers enough capability that Microsoft does not yet have itself, to make it an attractive acquisition target. But even if not, Microsoft might reasonably scoop up the service to keep it out of competing hands. (Incidentally, Wedbush Morgan analyst Michael Pachter argued to CVG earlier that Sony may have acquired Gaikai to keep it out of competing televisions.)


(Credit: James Miller)

If Pachter is right, Sony might limit Gaikai to its televisions, or it might not do anything with the service, preferring instead to simply keep it from its competitors.

That seems like a wasted opportunity, though. The aforementioned bandwidth issues and still-dominant brick-and-mortar game sales suggest that Sony won't go all-in on cloud gaming as the core function for a presumed PlayStation 4. But as a complementary service, or enabling higher-end mobile gaming, Gaikai seems to offer lots of potential. Imagine playing a core PlayStation 4 games on your console, then picking the game up exactly where you left off on your cell phone or tablet.


(Credit: Mark Licea/CNET)

A vacation week seems like the right time for an unlikely, speculative leap.

If Gaikai strengthens Sony's mobile gaming offering, what if Sony then licensed it out to other mobile phones? Android phones seem like the logical fit in this scenario, given Sony's existing Android-based Xperia phones. Apple also isn't fond of inviting competing markets into iOS, and streaming Sony games to a mobile Microsoft device seems to conflict with Microsoft's own mobile gaming efforts.

In that scenario, if Sony gave the Android platform an exclusive, console-quality gaming service, Apple might have to take notice. OnLive already runs on iOS devices (Android, too), but Apple might then consider acquiring and integrating OnLive (whose founder, Steve Perlman, is an Apple alum) directly into iOS.

Have your own big guesses for Gaikai and the future of cloud-gaming? Let's hear 'em.


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