Are PlayStation's days as a physical device numbered? On Monday, PlayStation maker Sony said it has agreed to purchase Gaikai, a cloud -gaming company, which immediately raised questions about whether Sony was moving away from manufacturing game consoles.
Founded in 2008, the Alison Viejo, Calif.-based Gaikai's cloud-based platform allows user to play streaming games on a variety of devices. The price was $380 million, and the deal is subject to approval by regulators.
Last month, Gaikai and Samsung announced a partnership to stream games to Samsung LED-LCD high-definition TV sets. The games will include such titles as Mass Effect 3, Dragon Age 2, and the Dead Space series.
Sony's acquisition is raising questions about whether the company's strategy is to replace hardware consoles completely and use the existing universe of devices, or to complement its console with a cloud-based service that requires no downloads and no physical media.
Andrew House, who leads Sony's video-game unit, told news media Monday that the acquisition was "recognition on Sony's part that the cloud and cloud streaming technologies are going to have a profound and possibly a very positive impact" on the game business, as well as "content in general."
One of the best known cloud-game services, OnLive, now becomes the target of rumors about whether a buyer, such as Microsoft or Nintendo, might emerge. Some industry analysts have pegged OnLive as being worth five or six times Gaikai's price tag.
There has also been speculation that, at its relatively low price, Sony bought Gaikai mostly as a defensive measure, to keep it from other TV set manufacturers. In this scenario, Gaikai's value for Sony is to become a service that adds differentiated value to Sony TV sets only.
Such a strategy could allow Sony to offer game programming on its TV sets, and the same games on other product lines, such as consoles and handheld game machines, tablets, or even cell phones. A user could potentially begin playing on one Sony device in the living room, and then pick up the same game on a portable device.
A move toward cloud-based services instead of a hardware-based one would mirror similar movement in other entertainment industries, including music, reruns of TV shows, delivery of applications and other software , and, to some extent, movie rentals. Of course, Sony is the prime business case of this lesson, given that Apple took over the music business with its iTunes and iPods, following Sony's reign with Walkman portable cassette players.
But cloud-delivered gaming requires high-speed connections, and, while latency issues are better than previously, a random glitch in online reception or transmission can mean the difference between virtual life and death. Gaikai's technology is supposed to help protect against some latency issues, offering the ability for players to begin gaming with the streaming in progress, and using predictive analysis to forecast a given player's next choice, based on previous patterns, and then to pre-load those elements.