Sony picks up Gaikai for $380M, enters cloud gaming

As console gaming becomes less lucrative, Sony sees acquisition of cloud gaming service as savior

Sony Computer Entertainment announced Monday that it will pay $380 million to acquire Gaikai, a cloud gaming platform service that currently delivers roughly 40 games (including the Sims and FIFA Soccer.) 

This move seems to illustrate how console creators are concerned that their clunky hardware gaming services may not be enough for consumers looking for cheaper and easier routes to play games -- especially now that mobile devices have gained so much steam in the gaming revolution.

PlayStation creator, Sony, says that (as a result of the deal) it will establish a new cloud gaming service. What this services will be named and how it will work is not public just yet.

Gaikai has raised $45 million in venture funding since 2010, with investors including Benchmark Capital, Rustic Canyon Partners, NEA and Intel Capital.

Sony, on the other hand, reported record losses last quarter, it noted that amid record losses for the company.

During the 2011 fiscal year, Sony sold 13.9 million PlayStation 3 units worldwide, compared to 14.3 million sold the previous year. The PlayStation 2 sold 4.1 million units, down from 6.4 million, and the PSP sold 6.8 million, down from 8 million.

In terms of software, the PlayStation 3 saw 156.6 million units sold worldwide, up from 147.9 million in the previous year, while 7.9 million PlayStation 2 software units were sold, down from 16.4 million. And 32.2 million PSP software units sold, down from 46.6 million year-over-year.

For the fiscal year ended March 31, 2012, the company's Consumer Products and Services division posted revenue of 3.2 trillion yen ($39.3 billion), down 18.5% year-over-year from 3.8 trillion yen ($48.3 billion), and losses of 229.8 billion yen ($2.9 billion) compared to profits of 10.8 billion yen ($135.5 million) in the previous fiscal year.

Overall, Sony posted revenues of 6.5 trillion yen ($81.5 billion), down 9.6% from 7.2 trillion yen ($90.1 billion) year-over-year, and losses of 456.7 billion yen ($5.7 billion), compared to losses of 259.6 billion yen ($3.3 billion) year-over-year.

Sony expects to swing back to profits, as it currently forecasts revenues of 7.4 trillion yen ($92.9 billion), an increase of 14.0% year-over-year, and profits of 30 billion yen ($376.5 million). 

Both LG and Samsung have signed deals with Gaikai to deliver games to their connected TVs this year and this could be an extremely lucrative boost and new field for Sony to head into.

And this acquisition and deals already penned by Gaikai could mean the ability to bring the PlayStation experience to any device (with or without and hardware.) 

"By combining Gaikai's resources including its technological strength and engineering talent with SCE's extensive game platform knowledge and experience, SCE will provide users with unparalleled cloud entertainment experiences," said Andrew House, President and Group CEO of Sony Computer Entertainment Inc, in a statement. "SCE 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."

In the four years since GaiKai was founded in Aliso Viejo, Calif., Gaikai created key partnerships and could be the ingredient mission to help Sony claw its way back to the top in gaming revolution.

"SCE has built an incredible brand with PlayStation and has earned the respect of countless millions of gamers worldwide," said David Perry, CEO of Gaikai Inc., in a statement. "We're honored to be able to help SCE 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."

With the PlayStation 4 expected in 2013, this is a crucial time for Sony to show its mobility and reinvention otherwise its marketshare could switch over to Nintendo products or move toward newer cloud solutions.

It will be interesting to see just how Sony leverages this new asset and what Nintendo could be doing in response to the shift in the market.