25 PSN logoAs you may have seen yesterday, Sony has acquired online gaming company Gaikai, which is specialized in executing games on powerful remote servers and streaming them to any types of clients, from thin set top boxes to tablets or computers. In the short term, this won’t do much more than making PC games accessible from a PS3, this acquisition will open a new world of possibilities for Sony.

For example, you can imagine that Sony will make PlayStation games available to more people. The same technology can also be used to stream movies (+music) and build a service such as Vudu, which can be easily deployed on any TV and devices because most of the user-interface code is executed on remote servers. This is Sony’s best acquisition in a long time.

PlayStation Cloud, powered by Gaikai

Before online gaming services like OnLive or Gakai, you needed a powerful box to play the latest games. With the acquisition of Gaikai, Sony should have the technical ability to stream PC games to a cheap box or a PlayStation 2, PlayStation 3 and PSP/PS Vita portable consoles. But that’s only a very superficial first step.

The second step is to make PlayStation games available on Gaikai. Of course, Sony would do that without endangering its current PlayStation platform. For instance, you can imagine that PS3 users could access all PS2/PS1 games that may not be compatible with the current hardware.

Sony could also let PlayStation Network subscribers play whatever games they bought online from the PlayStation Network, from any machines (PC, Mac, Tablets…). It could also let PC/Mac/Android/iOS users access old PlayStation games over Gaikai. In the end, Sony could make “everything PlayStation” accessible to every platform – for a price.

Next-Gen gaming, without the hardware losses

It is also quite obvious that an “all-cloud” strategy for the next-gen PlayStation is not completely out of the question. Typically, Sony would take billions of dollars of losses when introducing a new gaming platform. That’s because it sells consoles at a loss, hoping to make the money back on games sales/royalties. Sony makes money from every single game sold on its platform – that’s how it works. Additionally, it also has powerful studios behind games like the God of War and Uncharted franchises.

By rolling out its next-generation games in the cloud, Sony would not need to sell a powerful hardware at a loss to millions of users. Instead, it could sell a cheap box that can stream content from a powerful server farm which would have a much higher compute efficiency as most people’s PlayStation consoles mostly sit there, doing nothing, during a typical week. This could save billions to Sony.

With the cloud model, Sony can also scale with demand and build data center as the platform gets more popular. If it uses a subscription-based business, its income can also become much more steady. It will be easier to sell PlayStation Network (PSN) subscriptions bundles as well.

Easier upgrade path for firmware and hardware

If Sony has all hardware under its control in data centers, it is much easier to manage both software and hardware upgrades. For instance, when Sony needs to roll out a new firmware update, it would be totally transparent to the users, and Sony can roll it back if something bad happens.

The company could also do the unthinkable: upgrade “PlayStation” hardware. That’s right: in theory, Sony could increase compute power (MHz, Cores, Cache), memory, GPU and other things that don’t break binary compatibility during the lifetime of the “cloud PlayStation”. It would be like having all the advantages of the PC, but none of the downsides.

Simultaneously closed and open

While competitor OnLive can only stream games from “open” platforms like Windows or Mac (by “open”, I mean that Microsoft or Apple don’t seem to forbid that use of their OS), I don’t expect Sony or Nintendo to allow them to stream games form their platforms anytime soon.

And that’s where Sony can really differentiate itself from OnLive. If they provide access to a wealth of PlayStation titles, OnLive can’t do much to counter that – unless it partners with Microsoft to offer Xbox games. Sony would be able to benefit from both PC games and PlayStation games on Gaikai if it decided to take that route. This is a powerful proposition.

And that comes in addition to the online movie and music business that Sony could attack with a unified platform based on Gaikai. Today, every device that wants to feature the PlayStation Network needs an custom-built app. With Gaikai, Sony can build that app once and for all in their back-end, and serve it with a very small custom-built client on the device (like the one in Samsung’s TVs). Vudu has taken this approach with great success.

Not Perfect

The possibilities are extremely exiting, but there are major obstacles that Sony needs to work on. The first is to figure out how their business will be impacted. PlayStation is the light of hope at Sony and the most profitable division. I’m sure that internal politics will rage as whether or not the company wants to do something “radical” with it. The good news is that Sony can make the jump progressive if it commits to one more console.

Secondly, Sony will need to build a lot of data centers, because if you want to stream games with low-latency, you need to be as close of your customers as possible. This is not like video stream that can be buffered for 10 or 30 seconds. If you want to play at 30FPS, the latency needs to be very low.

The technical limitations of the network can prevent optimum framerate and image quality. OnLive and Gaikai have this issue today: depending of your Internet connection, you may get noticeably degraded graphics and user feedback. Although streaming gaming is hugely “convenient”, it is not as “good” as having a powerful box in your home today. Sony could alleviate that by letting customers access both the PlayStation Cloud and PlayStation hardware options. That’s really the best of both worlds.

Conclusion

Obviously, all of this is speculation based on that fact that Sony will stream PlayStation content on Gaikai. I don’t know if it will happen, but the Gakai acquisition is certainly not about Sony becoming a PC gaming company, so chances are that sooner or later they will insert some PlayStation goodness in Gaikai. The question is what, when, and how it may change Sony Computer Entertainment forever.

Filed in Featured . Tags: gaikai, PlayStation, playstation network and Sony.
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