Like Nintendo and Sega announcing Mario & Sonic at the Olympic Games, the announcement that Sony and Microsoft are to “collaborate on new cloud-based solutions for gaming experiences,” as Sony put it, seems like the end of an era, or rather the beginning of one.
The broad strategic partnership covers a lot of ground, including: “Joint development of future cloud solutions in Microsoft Azure to support their respective game and content-streaming services,” and that, “together, the companies aim to deliver more enhanced entertainment experiences for their worldwide customers.”
Of course we’ve long-known that Sony didn’t have the cloud infrastructure, despite its successful PlayStation Now service, to rival Microsoft or Google when things get serious in the cloud gaming space. So it was always going to have to find a partner, either one of its potential competitors or a want-to-be competitor in the form of Amazon, to help deliver its services.
It also shows to what extent the incumbents of the games industry are looking over their shoulders at the upcoming Google Stadia, as Piers Harding-Rolls, head of games research at IHS Markit notes:
“The market entrance of significant new players – namely Google, potentially Amazon and the international ambitions of Tencent – will have prompted Sony to re-evaluate its position in the market. Microsoft will have also considered its position in light of these developments, especially Google’s Stadia strategy. In the context of gaining access to cloud services, when evaluating the market landscape for potential partners, it is clear that Microsoft is the best choice for Sony even with the competitive dynamic between Xbox and PlayStation. Working together they have a better chance to head of competition from the likes of Google, which has gone on dominate the last wave of technology disruption in the mobile space alongside Apple.”
And speaking of Apple, it’s not that unusual for direct competitors to work together when it makes good business sense. After all, Samsung has famously provided chipsets, memory and displays to many of its direct competitors, most notably for the rival iPhone, ever since its inception and makes a very tidy profit doing so.
As Kenichiro Yoshida, president and CEO of Sony pointed out: “For many years, Microsoft has been a key business partner for us, though of course the two companies have also been competing in some areas. I believe that our joint development of future cloud solutions will contribute greatly to the advancement of interactive content.”
Harding-Rolls also notes the broader upsides for Microsoft from the deal, whose cloud services have been engaged in a war with both Google and Amazon for many years:
“Microsoft is building an end-to-end cloud capability to serve the games industry. Its Xbox and future cloud gaming business is only one aspect of its ambitions to grow its exposure to the games value chain. Through Azure and its cloud-based tools and services, it intends to aggressively pursue third-party relationships in infrastructure, back end services and service delivery. The deal with Sony shows it is making significant progress in this ambition.”
And if you have PlayStation services running on your cloud platform, then that’s a great advert to any other provider of content that you can deliver for them as well.
Satya Nadella, CEO of Microsoft, said: “Sony has always been a leader in both entertainment and technology, and the collaboration we announced today builds on this history of innovation… Our partnership brings the power of Azure and Azure AI to Sony to deliver new gaming and entertainment experiences for customers.”
Gaming company’s used to fight to get the best developers working on their consoles, now the tech companies will compete to get the biggest and best content providers on their servers.