In Theory: Could the Sony/Microsoft cloud partnership end the console war?

Genuine shocks in the games industry tend to be few and far between, but who could have predicted last week’s announcement that Sony would be partnering with Microsoft to build the next generation of its cloud gaming operation? The possibilities here are remarkable – a potential consolidation of console titles hosted on one streaming platform, opening the door to a common standard in multiplayer gaming, with cross-play available on all games. The existence of the partnership proves how seriousy both platform holders are considering cloud gaming, raising many questions: will this herald the end of console hardware? Will PlayStation and Xbox eventually consolidate into one experience? And by extension – will the console war be over?

There’s plenty of scope for interpretation from last week’s announcement, which was rather vague to say the least. Not much more was given away in an investor conference Sony hosted in Japan a few days later either, but there is some interesting detail. We found out that the current PlayStation Now system occupies 15 datecentres and 37 network points of presence. We learned that remarkably, the system has 700,000 subscribers (downloadable PS4 games over 200 in number presumably helps) and that the existing infrastructure is specced to accommodate five million subs. We also discovered that PS Now’s lacklustre 720p streaming is set for an upgrade to full 1080p – but we also found out that it’s a system for the here and now. Next generation needs a partner who can supply mass scalability, and Microsoft is Sony’s preferred partner.

Realistically, there are two further cloud services who could have accommodated Sony’s requirements – Google and Amazon. Yet curiously, it was Microsoft that got the nod, raising the question of why the two rivals would collaborate. We can take it as read that the deal is advantageous to both partners, otherwise it would not exist at all. The Xbox vs PlayStation rivalry means little stacked up against the macro-strategies of Microsoft and Sony, so what’s in it for both parties?

For Microsoft, it’s a chance to host the vast majority of console and potentially even PC gaming on its systems – and possibly to see some level of convergence between Xbox Live and PSN. The advantages for Sony are obvious: at the very least, it gets access to a world class cloud network, run by a company that’s already done a lot of the heavy lifting in solving the many challenges that need to be overcome in producing a viable cloud gaming experience. Scalability really is the key here. Assuming that streaming takes off as many believe it will, the problem of access is paramount. Consider a launch like Red Dead Redemption 2: hundreds of thousands – possibly millions – of users would likely access the game on launch day. And not being able to service every user who has purchased the game during this crucial period would be a major failure point.

PlayStation Now may be able to service five million subscribers, but five million simultaneous users is another challenge entirely. To put it another way: would you still subscribe to Netflix if you couldn’t watch what you want, when you wanted?

And it’s this problem of scalability that raises further questions – specifically concerning differences in how Sony and Microsoft developers create their games. Xbox first-party studios do not actually produce Xbox-exclusive titles: PC is part of the mix. Take Forza Horizon 4, for example. It’s superb on Xbox consoles, but the existence of the PC version opens the door to running the game on a much more flexible cloud system – and not necessarily the ‘consoles in a rack’ that the first-gen xCloud servers consist of. Third-party developers are similarly set, as just about all of their console games also manifest on PC too. And having access to code that isn’t locked down to specific hardware is key: cloud servers needs to be paid for, and the best way to do this is to allow the hardware to double up with the kind of cloud workloads Azure currently accommodates. It makes sense economically for those servers to do more than just gaming alone.

Sony first-party titles are designed very differently – developers target PlayStation hardware directly, and to accommodate the kind of scale I think Sony is aiming for here, it makes more sense to use the hardware that’s already In situ as opposed to stacking Microsoft datacentres with bespoke PlayStation servers. Sony first-party studios porting their games to Microsoft hardware? It’s not beyond the realms of possibility. After all, there has been gradual convergence in console designs, to the point where at the most basic nuts and bolts level, there’s not a huge amount to differentiate an Xbox from a PlayStation. We’re at the point now where the difference in multi-platform games is mostly down to variances in rendering resolution: not exactly a big deal for a cloud streaming system where compression issues nullify much of the advantage of higher pixel counts.

There is an alternative however, but perhaps it strays too far into fantasy theory-crafting territory. The notion relies upon an unprecedented level of cooperation between two console manufacturers, but it is perhaps an option. Microsoft’s backwards compatibility team has delivered many technological miracles over the last few years and with that in mind, if an Xbox 360 can be recreated virtually with improved performance on hardware as lowly as the Xbox One S, who could bet against the same team running PS4 and perhaps even PS5 virtual machines on Azure’s much beefier cloud hardware?

If the challenges in terms of streaming quality and scalability can be overcome, there’s every chance that the need for Sony or Microsoft to produce home console hardware may well evaporate. The concept may seem ludicrous in the here and now, but go back to the genesis of Netflix – who would have believed that streaming movies and TV shows would power ahead of disc-based media? Similar challenges in terms of scalability and quality were overcome, and it’s now one of the most powerful broadcasters in the world, with a wealth of original content. The rush towards gaming on the cloud from so many different contenders tells us that major software publishers are anticipating this transition – and the basic existence of a Sony/Microsoft collaboration adds a hell of a lot of weight to the idea that the nature of where we play our games may be about to shift.

For those concerned about the prospects of future consoles, the good news is that nothing is going to shift in the short term. Sony saw the arrival of PS4 as a transition point, where the domination of physical media morphed into a market split between discs and downloads. According to its investor presentation, it sees next-gen streaming as a further choice for users, as opposed to a replacement to existing options. And the firm has also been quick to point out that PlayStation 5 development will not be affected at all by the agreement with Microsoft.

Any fundamental change to the current console model is years away, but the precedent set by music, movies and TV shows is very difficult to ignore. Streaming is the mainstream and higher quality delivery mechanisms still exist, but on a much smaller scale. The question is whether that diminished scale would still warrant the billions invested into new hardware with each console generation, especially when we already have a ready-made format in the form of the PC that could take on that role.

Of course, the extent to which Sony and Microsoft are set to collaborate remains an unknown at this time, with so little detail revealed that we had to wait until the investor briefing to see confirmation of a link between the agreement and the PlayStation business. The fact that so few people within either company were aware of the announcement tells us that it’s still very early days here – at the minimum, we could just be looking at some kind of hosting deal, but the potential is there for something much more significant: a revolution in the way we play, who we play with – and maybe even an end to the console war.