Microsoft Partners with Sony … on Gaming?!

Posted on May 16, 2019 by Paul Thurrott in Games, Microsoft with 48 Comments

In a surprise announcement, Microsoft revealed today that it is partnering with video game rival Sony on game streaming.

“Sony and Microsoft will explore joint development of future cloud solutions in Microsoft Azure to support their respective game and content-streaming services,” the Microsoft announcement notes. “In addition, the two companies will explore the use of current Microsoft Azure datacenter-based solutions for Sony’s game and content-streaming services. By working together, the companies aim to deliver more enhanced entertainment experiences for their worldwide customers. These efforts will also include building better development platforms for the content creator community.”

My, my. What an interesting turn of events. Sony, the current market leader in video games, lacks the global cloud computing infrastructure that will be needed to drive the coming generation of cloud-based game streaming services. But Microsoft, an also-ran in video games today, has that infrastructure. I had always figured that the software giant would partner with smaller players—Nintendo, perhaps—as well as individual game publishers.

Less interesting, Sony and Microsoft will also partner on AI.

“By integrating Sony’s cutting-edge image sensors with Microsoft’s Azure AI technology in a hybrid manner across cloud and edge, as well as solutions that leverage Sony’s semiconductors and Microsoft cloud technology, the companies aim to provide enhanced capabilities for enterprise customers,” the announcement continues. “In terms of AI, the parties will explore incorporation of Microsoft’s advanced AI platform and tools in Sony consumer products, to provide highly intuitive and user-friendly AI experiences.”

“Our mission is to seamlessly evolve PlayStation as a plaform that continues to deliver the best and most immersive entertainment experiences, together with a cloud environment that ensures the best possible experience, anytime, anywhere,” Sony president and CEO Kenichiro Yoshida says. “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. Additionally, I hope that in the areas of semiconductors and AI, leveraging each company’s cutting-edge technology in a mutually complementary way will lead to the creation of new value for society.”

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

I need some time to digest this. But this is big news.

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Comments (48)

48 responses to “Microsoft Partners with Sony … on Gaming?!”

  1. millerkl61

    I must be dreaming that I'm trapped in an ALTERNATE, alternate history "Red Dawn" like movie, where instead of Soviet paratroopers landing in a Colorado field, Satya Nadella is floating down from the sky on a "cloud," dressed vaguely like Willy Wonka (only Microsoft colors) singing, "Come with me, and you'll be in a world of pure Azure powered streaming..." Please wake me up! :)

  2. Sykeward

    My mind is reeling. As long as craziness seems to be coming true, what if this is the first step towards PlayStation and Xbox eventually becoming 2 brands of a common console gaming platform, like a successful-in-a-parallel-universe 3DO? The PS4 and XB1 already are very similar hardware-wise, and the next gen appears to be continuing along the same lines. This could be a, um, game changer

  3. Daekar

    They both must be scared over Stadia. I never thought I would see the day...

  4. giskemo

    This makes sense. Utilization of any hardware is the key here, this sound to me they are getting gravy. They should be seeing some high profit margins on this type of work. If you want to increase future revenue you need to build alliances where there are potential for revenues. This has nothing to do with XBOX in my mind.

  5. ebnador

    To me the bigger announcement is "In terms of AI, the parties will explore incorporation of Microsoft’s advanced AI platform and tools in Sony consumer products, to provide highly intuitive and user-friendly AI experiences."


    I see cortana, and Microsoft AI, built into Sony products, which will make sense because Sony will want its products to work with both alexa, and Google which I think cortana already does.

  6. dcdevito

    This is how to get to be a $1T company. You even make your competitors partners. Brilliant.

  7. JCerna

    I hate to say this but remember what happen to Sega Sony...


    Overall one platform for developers means a win for all gamers.

  8. Calibr21

    Makes sense. Not partnering with Sony will just result in them partnering with Google cloud or AWS, further strengthening a competitor in the cloud space.

  9. graham best

    Making sense of the Microsoft and Sony partnership on cloud


    Microsoft and Sony have competed on game consoles for three iterations. Sony has a commanding lead in console sales for a while, and the company has their own game streaming service. Why would they partner with Microsoft now?


    Microsoft nor Sony are planning on exiting the game console business in the near future. They’ve both made significant investments to the next generation of gaming consoles. Selling game consoles alone isn’t very profitable; however, it does encourage its customers to enroll in gaming subscription services. Think of it how razor companies give away the handle, but make money on the blade.


    This business model works well, but the game console market is relatively small. It would be far more profitable to open up gaming to a wider market. There are a multitude of more mobile smartphone users than console gamers, and it makes sense to try to grow into the bigger market.


    Game streaming to mobile smartphone users is technically challenging as connectivity is not guaranteed.  Video streaming can preload content to even out connectivity issues, but game streaming can’t do that. Worse, input lag is highly noticeable during action games. I have tried streaming my Xbox One to my PC, both using a gigabit Ethernet connection in the same room. I’m not a professional gamer, but the lag was distracting even to me.


    We don’t know a lot about how Microsoft’s solution will work, but part of its solution may be that AI is assisting in limiting the input lag. It may be the same type of solution that consoles use for auto aiming in first person shooter games, or steering assists in racing games. This may be magical for causal gamers, but hardcore gamers may complain about the lack of control. That’s why consoles aren’t going away soon.


    Google has their own game streaming service. Why didn’t Sony partner with them? I believe that Microsoft and Sony are both targeting Android. Google is feared that they may limit access. While Microsoft competes with Sony, Google may be the bigger threat.

    • jgraebner

      In reply to Graham Best:

      I think it is dangerous to make too much of this. I see it kind of like Samsung's components division selling parts to Apple, while their consumer phone divisions are competing. Basically, this is Sony making a deal not with Microsoft's games group, but with the Azure division, which happens to be a top-3 provider of cloud services. It's possible that this isn't an exclusive arrangement or that Microsoft simply outbid Amazon and Google for the contract. Meanwhile, Sony is way too big a client for the Azure sales team to say "no" despite the fact that another Microsoft business unit competes with them.

  10. brettscoast

    Good post thanks Paul very interesting makes good sense just wondering if this has some significance for xbox going forward?

  11. ReijMan

    Right when I thought Microsoft was gearing up content wise to beat back in the next gen. Buying all those fantastic game studios and really investing in the XBOX division. I think there will be another big surprise before E3.

  12. pvenky

    Did your head explode Paul? Would've been even better if Nadella and Yoshida were literally hugging, wouldn't it? I hope Mary Jo brings her gong for the next episode :-)

  13. nobody9

    The partnership makes a lot of sense, though I won't be subscribing. They both have experience with satisfying hard-core gamers (i.e. combined, they cater to nearly all age groups), whereas Amazon just doesn't. If anyone can give Google Stadia a run for the money, it's this partnership. But, as a team, both partners will have to hit the ground running, or remain just a mere Steam alternative.

    • nobody9

      In reply to nobody9:

      The ease-of-engagement is what makes both Google Stadia (and to a lesser extent, Steam) so formidable, whereas the distributed-hardware model of Microsoft and Sony is a real barrier. Thus this partnership needs to figure out how to counter the barrier-to-engagement problem before Google digs into that market too far.

    • nobody9

      In reply to nobody9:

      Sony really only appeals to yuppy Millennials, whereas Microsoft (with the help of Steam) appeals to the working class both young and old. Thus they need each other to remain relevant to the rest of the un-engaged world.

  14. martinusv2

    Now I know why it was cold this morning. Hell must have frozen.

  15. DaveHelps

    If gamers want cross-play, and Microsoft want Xbox Live to be truly multi-platform, and Sony want a good experience for their players, running PSN in Azure alongside Xbox Live might make everyone happy.

    Or suppose a gamer bought a PlayStation, and used it as an endpoint for xCloud???


    Lots to think about here.

  16. kevin_heskett

    So Microsoft now makes money off of Sony for PSN usage? Sounds good to me.

  17. Ben Lee

    I was expecting Sony to partner with Amazon or even Google in cloud services, not a direct competitor ?

  18. Skolvikings

    Serious question, does Microsoft stand to make more money selling cloud solutions to Sony and Nintendo along with Xbox, despite knowing that the cloud solution might help keep Xbox in 3rd place? Is this just broader picture, good business sense from Microsoft?

  19. hellcatm

    Wow, that was pretty shocking! I was hoping to hear they were going to do cross platform gaming so Xbox players can play with and against Playstation players. Maybe they'll come to an agreement with that too.

  20. jbinaz

    I remember when Sony was a great brand in consumer electronics: the Walkman, CD players (portable and home), TVs, receivers, speakers, etc. Heck, they even made smartphones (maybe still do?) - my daughter had one years ago and *loved* it. They were never the best brand out there, but they almost always built a solid product, i.e., a great value for the money. But they don't have nearly the cachet they used to; they seem to have lost out to lots of other brands. Is my perception of things off? Is it because I'm in the U.S. and don't hear as much about the rest of the world?


    Where does their future lie? Their gaming brand is obviously well respected, but what else do they have? (I really don't have any clue where their strengths lie.) There's no way the could ramp up their cloud fast enough, so partnering makes sense. But to go with the company that also does gaming?


    I don't know what to make of this. It's a business win for Microsoft, but does it mean anything for Xbox? So many questions.

    • jgraebner

      In reply to jbinaz:

      Revenue-wise, Sony is largely an entertainment and financial services company now with their entertainment business having largely replaced the appliance business as the businesses consumers interact with the most.


      Doing a search online, I found that in 2018 the "Game and Network Services" division brought in around $20B in revenue while their other entertainment businesses (movies, TV, music, home video) brought in around $25B. Financial Services is their next biggest business with around $11.5B in revenue. "Devices" is down to around $8B and mobile is at around $4.5B.


      Things have changed a lot since the old days when the usual advice for buying a TV was to "buy the best Sony you can afford."

  21. SvenJ

    Remember when Ballmer declared Linux a virus, stomped on an iPhone, threw a Playstation off the roof of the HQ (well maybe I imagined that). This isn't your Father's MS.

  22. glenn8878

    I'm sure Sony no longer feels Xbox is a competitor and is willing to use Microsoft technology to further advance PlayStation. On the other hand, Microsoft's Xbox has fallen so far behind that getting Sony's scraps helps the bottom line.

  23. irfaanwahid

    I don't get it.. why wouldn't they go to AWS, or Google's Stadia? A bit ironic Sony going to its biggest competitor, Microsoft.

    • glenn8878

      In reply to irfaanwahid:

      Sony doesn't regard Microsoft as a competitor anymore. Xbox is so far behind that it'll never catch up.


      Don't you know Google will be a gaming streaming competitor soon. Google would be even more competitive as an gaming streaming platform than Microsoft because of it's internet presence alone.

      • Stooks

        In reply to glenn8878:

        " Google would be even more competitive as an gaming streaming platform than Microsoft because of it's internet presence alone."


        You are giving Google way to much credit. More than half of the stuff they launch ends up getting canceled.


        As a cloud provider they are 3rd or 4th place behind Amazon, Microsoft, and IBM if I am correct. G-Suite can get more than 10% of the market, and in the EU G-Suite is actually losing market share. 86+% of their revenue comes from ad revenue. They have NO games what so ever right now, as in no original IP. They have never ran a gaming service, let alone a cloud gaming service. They are 4th? when it comes to cloud based music and maybe that is because they have the most confusing consumer message when it comes to Google Play music vs Youtbue music and many other Youtube content offerings....TV, gaming, Red, just plain Youtube.


        My prediction is that Google does launch their gaming services, and in 2 years they give up, never achieving any real market share. That is the Google we all know.

    • Stooks

      In reply to irfaanwahid:

      I bet Microsoft made them a really good deal to keep them away from both of them. AWS seems like it would make the most sense. Heck Amazon should just buy Sony.

  24. Alastair Cooper

    Why is this any more surprising than the fact that Netflix run on Amazon Web Services despite the fact that they are a competitor to Prime Video?


    Businesses do this sort of thing all the time.

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