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Microsoft, Sony Partner on Game Streaming, Chips and Artificial Intelligence

It’s the best of times and the worst of times when Microsoft and Sony form a cloud gaming and AI partnership. It just goes to show anything is possible in the era of the Cloud.

Microsoft and Sony — the companies behind Xbox One and PS4 respectively — have decided on a strategic partnership.

In Tokyo‘s morning trade, Friday May 17th, 2019, Sony’s stock skyrocketed more than 10%, soaring to levels not seen since December 2018.

The two companies plan on sharing technology and information going forward and build upon shared infrastructure for some of their future initiatives. It’s a bit of a bizarre idea, to be frank.

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Cloud and Game Streaming

  • Sony is basically set to use Microsoft’s Azure cloud services for streaming games and media.
  • The deal is in its early stages, with many specifics yet to be determined. But the owners of two major consumer interactive entertainment franchises would collaborate to stream games and content to consumers and offer game makers new development tools.
  • In a sense it shows Microsoft is serious in taking on Amazon in Game Streaming and the Cloud.

Both companies say they will “share additional information when available,” but the partnership means Microsoft and Sony will collaborate on cloud gaming.

That’s a pretty big deal, and it’s a big loss for Microsoft’s main cloud rival, Amazon. I personally think Amazon should one day acquire Snapchat (and their gaming initiatives) and perhaps also Pinterest (for their advertising and social commerce efforts).

Analysts are a Bit Shocked

The reason it’s a bit shocking is this: for the last two decades, Sony’s and Microsoft’s gaming divisions have been locked in all-out war against one another: on price, on hardware, on franchises, on exclusives, etc…

  • In the Cloud wars, even strategic rivals can become friends.
  • With Google and Apple entering the gaming sector, with streaming — it’s a different battle altogether.

While people seem to think Google has a good chance at becoming a player in game streaming, I still think with Twitch Amazon will do better.

Meanwhile, Google Stadia with its game streaming service supposedly has a huge advantage in its global presence, brand recognition and unique entry points, such as search and YouTube. But who can stand Microsoft or Google as brands for younger gaming consumers? I just can’t see it panning out that well for them.

Stadia will stream games from the cloud to the Chrome browser, Chromecast, and Pixel devices. But who actually cares?

Let’s think a bit further along, namely if the convergence of the components of the console platforms continues it is possible that there may be an opportunity to virtualize both next-gen Microsoft and Sony servers in the cloud using similar infrastructure. I think this is why Amazon will have a growing force to do this.

Sony and Microsoft also said they could potentially develop new image sensor chips together, though no specifics were mentioned on how the chips would be used.

Sony already has a cloud gaming service, but Microsoft is promising trials of its own xCloud gaming service later this year.

Twitch is really the place to go for young gamers. I don’t know anyone who actually uses Microsoft’s Mixer. Amazon’s acquisition of Twitch for nearly $1 billion looks genius now, since it’s a major destination for gamers to watch other players competing in the e-sports market.

Game Streaming is Going to be Huge

Apple Arcade exists, too, but I don’t know that anyone is worried about it, exactly. It’s a different kind of beast, like Snapchat’s playful entry into gaming.

Sony doesn’t lack technical chops, or the software necessary to pull off a streaming service — but it may simply make more sense to deploy via Microsoft’s Azure than bring its own distribution systems up to par. Why didn’t Sony choose Amazon though? It’s not entirely clear to me.

Japan’s Sony is also a major supplier of camera chips for smart phones and other devices.

But as is the usual in business, the latest team-up comes at a time when notable new challengers are attempting to up-end the industry.

Sony and Microsoft said they would explore how to use Microsoft’s AI tools in Sony’s consumer products “to provide highly intuitive and user-friendly AI experiences.” I’m not going to hold my breath, I’ll wait to see what Amazon does in game-streaming related to the Cloud.