Microsoft And Sony Are Teaming Up For The Future Of Gaming

We never thought Sonic and Super Mario would get together. Now we can see them compete in cartoonish Olympic games or, well, beat the snot out of each other in Super Smash Bros—After years of battle, comes the white flag and guess who is holding it? Both companies of course.

The latest gaming team up, the just announced partnership between Sony and Microsoft. Fierce rivals for years in the gaming industry – the companies’ PlayStation and Xbox consoles have traded blows for nearly two decades now—the two have teamed up  to enhance their cloud gaming and AI initiatives. This unlikely alliance looks like it was put in place to battle the upcoming threats from Google, Amazon and Tencent.

According to Bloomberg:

“Negotiations with Microsoft began last year and were handled directly by Sony’s senior management in Tokyo, largely without the involvement of the PlayStation unit, according to people familiar with the matter. Staff at the gaming division were caught off-guard by the news. Managers had to calm workers and assure them that plans for the company’s next-generation console weren’t affected, said the people, asking not to be identified discussing private matters.”

The partnership effectively allows Sony to tap Microsoft’s technology to help with areas that the company has struggled with. Sony has taken heat for years over slow download speeds, something that typically hasn’t plagued Xbox owners. Using Azure data centers and eventually moving over to Microsoft’s cloud solutions should allow Sony to focus on its own platform rather than trying to solve technical issues. Sony will also tap Microsoft’s artificial intelligence services to improve the user interface in its products.

So what does Microsoft get out of the deal? Aside from adding a major customer to its already very profitable cloud business, the company will gain access to Sony’s image sensors, which it plans to use to create “new intelligent image sensor solutions.” The companies appear primarily focused on how to improve the functionality of the sensors for enterprise customers, though consumer solutions — an improved Kinect-style system, for instance — are also possible.

Kenichiro Yoshida, President and CEO, Sony Corporation (left), and Satya Nadella, CEO, Microsoft.

“Sony has always been a leader in both entertainment and technology, and the collaboration we announced today builds on this history of innovation,” said Satya Nadella, Microsoft’s chief executive officer. “Our partnership brings the power of Azure and Azure AI to Sony to deliver new gaming and entertainment experiences for customers.”

“PlayStation itself came about through the integration of creativity and technology,” Sony CEO Kenichiro Yoshida said in a press release. “Our mission is to seamlessly evolve this platform as one that continues to deliver the best and most immersive entertainment experiences, together with a cloud environment that ensures the best possible experience, anytime, anywhere. 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.”

In the wake of this revelation and Sony’s Thursday announcement that it would repurchase up to 4.8% of the total number of stock shares issued — worth approximately $1.82 billion, Sony’s stock skyrocketed 9.89% to levels not seen since December 2018. The buyback period will last from May 17, 2019 to March 31, 2020.

What does this mean for the future of gaming? It’s impossible to tell. The wording is too vague and dense, and the collaboration is just taking flight. But, a reasonable guess would be that both Microsoft and Sony view cloud-based game streaming — similar to what Google Stadia hopes to accomplish — as the industry’s next major trend. This might be their way of trying to build the infrastructure as quickly as possible. We’ll certainly glean more insight into their thought processes when the next PlayStation and the next Xbox are revealed, probably later this year.