Sony buys Gaikai game streaming service for $380M

Sony announced tonight that it will acquire the streaming video-game service Gaikai for $380 million. The deal officially closed on June 30, and Sony is purchasing the California-based company as part of a move to disrupt the gaming business.

The news doesn’t come as a shock; rumors about the potential acquisition rose in May and June, but no official announcement was made until tonight by Gaikai.

What this acquisition means for partnerships that companies like Samsung, LG, Walmart, and others have with Gaikai is unclear, but the potential benefits for Sony are huge. They go anywhere from in-store kiosks playing any PlayStation 3 or PlayStation Vita title straight from a TV connected only to the Internet, to no need for future console hardware because of streaming-only services. Sony has had the benefit, compared to Microsoft’s Xbox Live service, of offering free online gaming, and with a streaming cloud service, the company may be able to turn back the Xbox’s dominance this generation.

Sony has repeatedly had trouble creating software platforms, something that Gaikai has done tremendously well with its streaming game service. This may prove to be the most important part of this acquisition for Sony, which has struggled to gain dominance in software development when compared to rivals like Microsoft and Nintendo. Sony’s move to the PlayStation Mobile, a suite for games that run on both smartphones and game consoles, will also benefit from streaming functions. We’ve already seen earlier this year that streaming games can function well over cellular networks.

“By combining Gaikai’s resources, including its technological strength and engineering talent, with Sony’s extensive game platform knowledge and experience, Sony will provide users with unparalleled cloud entertainment experiences,” said Andrew House, president and group CEO of Sony Computer Entertainment. “Sony will deliver a world-class cloud-streaming service that allows users to instantly enjoy a broad array of content ranging from immersive core games with rich graphics to casual content anytime, anywhere on a variety of Internet-connected devices.”

“Sony has built an incredible brand with PlayStation and has earned the respect of countless millions of gamers worldwide,” said David Perry, CEO of Gaikai. “We’re honored to be able to help Sony rapidly harness the power of the interactive cloud and to continue to grow their ecosystem, to empower developers with new capabilities, to dramatically improve the reach of exciting content and to bring breathtaking new experiences to users worldwide.”

We’ve reached out to both Sony and Gaikai for more information and will update this article as the story unfolds. Mitch Lasky of Benchmark Capital said in a post tonight that years ago, back in the fall of 2009, that his company invested along with Rustic Canyon Ventures and New Enterprise Associates because Gaikai stood at the intersection of cloud computing and next-generation game distribution. Of Gaikai’s Perry, Lasky said, “David believed that his idea could change the world and he went out and made it happen.”

In its own post, NEA’s Paul Hsiao and Greg Papadopoulous said, “The strategic significance of this transaction within the gaming and interactive entertainment sector is akin to Apple’s launch of iTunes years ago in the music space—it will no doubt provide new opportunities and shift the dynamics in an ecosystem that includes game platforms, publishers, developers, TV manufacturers, cable and broadband operators, mobile devices, graphics chip companies, and content distribution networks. From a consumer perspective, it’s thrilling to see interactive cloud delivery of video games taking off. One can imagine playing all the great titles anywhere from any device connected to the Internet – similar to the way we consume music and movies today.  In addition to the pure super-low latency streaming capabilities, Gaikai’s technology can amplify existing gaming consoles by creating a local display and interaction point where additional compute and rendering capabilities, upgrades, etc. can be provisioned automatically in the network.”

In a statement on Monday, Microsoft said, “The cloud has been a key component of our strategy and a big area of investment with Xbox for many years. Through Xbox LIVE we’re serving up gaming and entertainment in the cloud to more than 40 million people. We’re committed to delivering extraordinary entertainment experiences across devices in a uniquely connected way through Xbox, Windows Phone, Windows 8 and other popular devices, and we’re looking forward to continuing to innovate in this space in the future.”

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