The unlikely alliance between Sony and Microsoft took everyone by surprise last week. Including Sony’s own PlayStation division. The very same team who has spent the last 20 years competing against Xbox for a share of the $38 billion console market. According to Bloomberg, PlayStation team only learned about the cloud deal after the announcement that came last Thursday.
Sony struggled to develop its own cloud platform for seven years. Apparently, whatever advances on the cloud-computing front the company had just didn’t cut it. Not in comparison with cloud providers like Google and Amazon.
With PlayStation generating a third of Sony’s revenue, the company entered the talks with Microsoft last year. PlayStation unit, however, remaied mostly uninvolved. On May 16, the two tech giants announced a partnership to jointly work on streaming technology and host PlayStation’s live services on Microsoft’s Azure cloud infrastructure. Right now, PlayStation Network is hosted by Amazon Web Services. Sony and Amazon’s attempts to agree on commercial terms in the future fell through.
Apparently, the deal between Sony and Microsoft is a win-win arrangement. Sony will be able to secure its place in the cloud gaming market. According to IHS Markit, it was worth $387 million in 2018 and will hit $2.5 billion by 2023. Microsoft, on the other hand, might become the industry leader for cloud deployment.
However, with cloud gaming projected to only account for 2% of the industry’s revenue in 2023, the deal between Sony and Microsoft seems like a preemptive measure in case cloud gaming replaces traditional consoles in the future.
As for now, both companies are going ahead with their next-generation consoles without any late changes. Whatever the future of gaming may hold for PlayStation, Sonly plans to stick with its strategy of building a portfolio of strong exclusive titles.
“Exclusive content remains key,” said Piers Harding-Rolls, IHS Markit’s head of games research.