How Sony bought, and squandered, the future of cloud gaming - The Verge

Stop me if you’ve heard this one before: a video game platform that lets you play games with the press of a button, no need for discs or downloads. Tap on a YouTube ad for a game, and you’re instantly playing in your web browser. Experience the latest and greatest games on your ancient laptop, phone, or tablet, thanks to remote servers instead of having to buy a console or build a powerful gaming PC. Fire up a game on the TV, then seamlessly pick it up on your mobile device. Stuck in a game? Ask a friend to take over your controller from across the internet.

If that sounds like the lofty pitch for Google’s Stadia cloud gaming service, you’ve been paying attention. But every single one of those things was promised years ago by a startup named Gaikai — a startup that Sony bought in 2012 for $380 million. At the time, Sony gave every indication that it would harness the full potential of a PlayStation cloud. It even bought Gaikai’s closest competitor, OnLive, in 2015 and launched a service called PlayStation Now that finally hit 1 million subscribers in October. But half a decade later, the company has barely tapped into cloud gaming’s promise, and competitors like Google seem poised to attract the gamers that Sony failed to convert.

I doubt it’s a coincidence that Google and Gaikai’s pitches sound so similar. As Gaikai co-founder, CEO, and former PlayStation Now chief David Perry pointed out to me in an interview on the day Stadia debuted, Google gaming boss Phil Harrison used to sit on Gaikai’s advisory board. Jack Buser, Stadia’s head of business development, used to run Sony’s PlayStation Now. Heck, a clean-shaven Sundar Pichai was the one who first introduced how Gaikai could stream games natively in the Chrome web browser three years before he became Google’s CEO.

Mind you, Google is already having plenty of trouble meeting the lofty goals it cribbed from Gaikai, breaking many of the promises it made before launch. But how did Sony let Google become the front-runner in cloud gaming to begin with, after having the better part of a decade to freely build it out?

Let’s take a quick trip back to February 2013 when Sony introduced the PlayStation 4 and revealed Gaikai’s newfound role in the whole thing. When Perry strode onstage, he presented a vision of a PlayStation Network like we’d never seen before, one that would let you instantly try any game before you buy it. His words:

With the Gaikai cloud technology, our goal is to make free exploration possible for virtually any PlayStation 4 game in the PlayStation Store. Imagine you’re in the store, checking out the latest titles and you see something that catches your eye: no problem. You can simply press the X button to hop in and start playing the game. Now in the past, not all games were available, and the ones that were had to be kind of the ‘lite’ version, where they’d been edited down so they could be downloaded reasonably quickly. With Gaikai and the PlayStation Store, you’ll be able to instantly experience anything that you want. I’ve always liked that concept of try it for free, share it if you like it, and pay only for the games you fall in love with.

It’s easy to forget this was Gaikai’s pitch from the start: instant free demos of games you can try before you buy, using practically any device you own.

I got an exclusive first look at Gaikai in December 2010, and I’ll never forget what Perry asked me afterward: not whether the streaming quality was good, but if I’d experienced enough to figure out whether the game was worth buying. That was why Gaikai originally streamed games from YouTube and Facebook ads — they were legitimately ads! — though Gaikai was also willing to let publishers stand up their own servers and set their own pricing if gamers wanted to turn those ads into game time.

When I visited Gaikai’s headquarters in June 2012, I was amazed by how many endpoints Gaikai had already built. Both LG and Samsung TVs were slated to feature the service. It worked with an off-the-shelf Android tablet. Best Buy and Walmart had live game demos you could play on their websites, and you could share demos on Facebook with your friends and relatives if you liked.

But Perry says most of that went out the window when he cashed Sony’s check. “After Sony acquired Gaikai, we went quiet. I stopped giving speeches, I stopped pushing this as the future of the industry ... We withdrew from all the deals,” he relates.

Though Perry says he’s loyal to Sony for buying Gaikai and eventually building a service with 1 million subscribers instead of just “shoving it somewhere in a drawer,” he says his personal opinion is that Sony didn’t really understand what to do with Gaikai, and he started by trying to shoehorn Gaikai’s tech into a way to sell its own hardware.

“Sony acquired something that they thought would be a good idea to buy because they could feel the momentum, and I don’t think at the time it was clear to them which business they were in,” Perry says. “If you are in charge of PlayStation, are you in the hardware business or are you in the gameplay business? I don’t think that was clear. Because if you’re in the hardware business, this isn’t very interesting. If you’re the guys building hardware, and someone starts talking about the cloud, it’s just like, ‘Meh, we’ve got work to do.’”

And “meh” was definitely how I felt when Sony’s PlayStation Now cloud gaming service debuted. When an open beta launched in late 2014, it was ridiculed as the antiquated Blockbuster of video games: a service where you’d have to rent each PS3 title — and only PS3 titles — for more than you’d pay to buy a used disc at GameStop. It felt like an expensive way to cover for the fact that the PS4 wasn’t backwards compatible with PS3 games.

Sony later added a $20-a-month subscription service for a selection of less-desirable games alongside the rentals (it eventually ditched rentals altogether), and it expanded support to the PS3, PS Vita, PlayStation TV, a handful of Sony TVs and Blu-ray players, and even a few Samsung smart TVs.

But it took until late 2016 for Sony to finally let you play PlayStation games on a PC, and it was mid-2017 before it added a back catalog of current-gen PS4 titles instead of exclusively older games. And it was tough luck if you wanted to play those PS4 games on your Sony handheld or smart TV because Sony ditched every other platform, save PC and PS4, along the way. It was just last month when Sony finally dropped the price of PlayStation Now to a more reasonable $60 a year and deigned to add a few flagship games like God of War and Uncharted 4. But even those $20 “greatest hits” games will only be available to stream through January 2nd, 2020.

Even though Sony has finally stopped trying to use its PS4 Remote Play app to sell Sony smartphones, and it opened it up to iPhone and Android gamers (years after shutting down a perfectly good hack), there’s no parallel PlayStation Now mobile app in sight. Sony completely ceded the Gaikai / OnLive era idea of delivering cloud games directly to phones. That’s where Microsoft’s xCloud is now striking first and where Google and early Gaikai partner Nvidia may also have an opportunity.

There are reasons why Sony took it slow with Gaikai — they’re just unfortunate reasons — like how Sony’s initial PlayStation Now service relied on having actual PS3 hardware in the data center for every single player. That capped Sony’s physical and economic ability to expand the service as quickly as it might have liked. Or how the company wound up diverting its attention to VR.

“Cloud gaming is working. We’ve demonstrated it. We’re sort of waiting for things to get better and have more power in the cloud, faster internet speeds, all the rest of it ... And then VR comes out, and VR took all the air in the room for a while,” says Perry. He also points out that Sony never put much marketing behind PS Now or ran a real ad until last month. Sony also never wound up offering a bundle with its other subscription services like PlayStation Plus and PlayStation Vue, for that matter.

When I ask Perry what happened to the key part of his original vision — the idea that PS4 players would be able to instantly sample games for free — he admits that Sony never actually tried.

“It was something I was passionate about, but I don’t think it had the support of others,” says Perry, adding that he found it wasn’t necessarily compatible with “the harsh reality of business.” One example: he spoke to a publisher who told him, “David, we don’t want anyone to play our game.” When Perry asked why, he says they replied: “Because the trailer does a better job of convincing them our game is good. The game isn’t very good to be honest, but the trailer makes it look good.” It was a clarifying moment.

Even so, Perry says he believes gamers would “have to be insane not to sign up” for PlayStation Now at the new lower price, as long as they spend a lot of time gaming. “The amount of games you’re getting for the money is absurd.” But he also believes that Sony, Google, and other prospective cloud gaming providers need to stop trying to stick existing gaming components into their servers and convince publishers to build and share their best games instead of just a back catalog of titles. “They have to decide that this is the future.”

Perry’s somewhat worried that cloud gaming will adopt the same pattern we’re seeing with other streaming media today, where Disney and HBO and Apple and many more are all standing up their own video delivery services to compete with Netflix for our attention. “When things get out of control, you end up with multiple streaming services. And you want to watch Harry Potter, and you don’t know where it is,” he says. Sony had seven unchallenged years to convince publishers, but now Google, Electronic Arts, Ubisoft, Microsoft, Nintendo, Amazon, Verizon, Walmart, Nvidia, and others are all testing the waters for their own possible cloud gaming subscriptions.

None of this is to say Sony wasted those seven years or made the wrong decisions. The PlayStation 4 wound up becoming a phenomenal success. It’s the second best-selling console of all time having shipped over 102 million units, handily winning this console generation. PlayStation VR is also one of the best-selling console accessories ever, even if VR hasn’t taken off quite yet. And Sony did need to make some hard choices during the past decade to turn around its foundering business. This is the decade Sony decided it was no longer an electronics company, chopping off pieces of itself to survive.

Some of Gaikai’s know-how might have even been responsible for that success. In 2012, Gaikai showed me a demo where you could start playing a game while the rest of it downloads in the background — something that became a core feature of the PlayStation 4. Share Play, a feature that lets you see a friend’s screen from over the internet and then take over the controls, also eventually shipped. But even if Sony doesn’t become a front-runner in cloud gaming, buying Gaikai and OnLive early on means it has a lot of patents on the tech.

When I try it again for the first time in years, I have to admit PlayStation Now isn’t bad. I’m streaming God of War on my Windows desktop at a fairly lackluster 720p resolution, but with nary a hitch. There’s no way I’d spend $10 a month or $60 a year for that experience — not when I can own those same games permanently for $10 or less per disc — but I would pay if Sony gave me the latest games there. Better yet, I’d pay to get games that aren’t even possible on console, with hundreds or thousands of simultaneous players, incredibly advanced physics simulations, and AI-voiced NPCs that don’t just repeat the same pre-programmed lines of dialogue. It’s not clear whether Sony has any intent to do so — and now it’ll have to fight its own ideas in the hands of much wealthier adversaries like Google. All we know for sure is that the PlayStation 5 is coming, and Sony has a vague interest in maximizing the “off-console opportunity” of cloud gaming as well.

In 2014, Perry claimed that Sony had “fully greenlit” a project where Gaikai would help build “the fastest global network ever made” to let gamers play like never before. That may still be the plan, but Sony’s going to need some help. That may be why it struck a cloud gaming partnership with Microsoft this May, teaming up with its chief rival.

Sony was one of the few companies that believed in cloud gaming enough to spend big in 2012, just as it was one of the few that believed in VR. But that wasn’t enough to make Sony a leader.

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