David Perry, Gaikai's chief executive, in the cloud-based video… (Mark Boster, Los Angeles…)
Sony Corp., which for the last 18 years has centered its game business on its PlayStation consoles, is making a major shift in its strategy by acquiring Gaikai Inc. for $380 million.
Based in Aliso Viejo, Gaikai is one of the leading companies in the new business of cloud-based video games, through which people can play on almost any Internet-connected device. Just as with Netflix's Instant video streaming service, games on Gaikai are stored on a remote server and streamed to a computer, tablet, smartphone or TV set without the need to download or install special programs.
The new Gaikai-powered cloud service gives Sony the opportunity to broaden its existing video game business beyond its PlayStation 3 consoles, 65 million of which have been sold worldwide, according to estimates by the online trade publication VGChartz. By comparison, Nintendo Co. has sold 96 million Wii consoles, and Microsoft Corp. has sold 67 million Xbox 360s.
With the acquisition of Gaikai, Sony's cloud gaming service is likely to be integrated into its other electronic devices, including Bravia television sets, Android tablets, Xperia smartphones and Vaio laptop computers.
"This move puts Sony in a better position to expand its audience beyond the PlayStation user base to reach a much broader audience," said John Taylor, managing director of Arcadia Investments Corp. "The future battle within games could very well be played out in the cloud."
Sony is competing not just against Microsoft and Nintendo but also against Apple Inc., Facebook Inc., Amazon.com Inc., Google Inc. and potentially Samsung Electronics Co. to become the dominant digital entertainment gateway for games, movies, music, sports and TV shows.
Four-year-old Gaikai offers games from Electronic Arts Inc., Ubisoft Entertainment, Warner Bros. and others. But its technology also could be used to deliver any type of media, according to David Perry, Gaikai's chief executive.
Gaikai has long been rumored as a likely acquisition target for an established technology company such as Sony. Samsung, which signed a contract with Gaikai in June to begin streaming games on its Internet-connected television sets, was also kicking Gaikai's tires, but it decided to see how well the service worked before considering an acquisition, according to an executive close to the companies who was not authorized to speak publicly.
Several companies have developed similar services and compete with Gaikai, including OnLive Inc. and Playcast Media Systems. Eventually, most video games are expected to be played via the cloud, but current broadband constraints don't allow the most sophisticated titles to work that way without glitches.