Sony CEO Hands Microsoft a Golden Assist by Downplaying Cloud Gaming Importance

A brief statement shared by Sony CEO and president Kenichiro Yoshida with the Financial Times may be seen as an indirect assist to Microsoft’s effort to clear the cloud gaming market competition concerns that led the UK regulator to block the acquisition of Activision Blizzard.

In the quote reported by the FT, the Sony CEO downplays the threat the cloud gaming market poses to consoles, pointing out technical challenges like latency.

I think the cloud itself is an amazing business model, but when it comes to games, the technical difficulties are high. So there will be challenges to cloud gaming, but we want to take on those challenges.

Interestingly, Sony CEO and president Kenichiro Yoshida struck a deal with Microsoft CEO Satya Nadella in May 2019, when the two companies signed a strategic partnership to collaborate on cloud-based solutions for gaming and AI.

One of the results of that partnership is Gran Turismo Sophy. Announced in February 2022, GT Sophy is an AI agent built on machine learning algorithms that can challenge even the top players. In the interview with the Financial Times, Yoshida said that GT Sophy was able to take advantage of the many hours when cloud gaming servers were more or less empty to train itself in Gran Turismo 7.

The dark time for cloud gaming had been an issue for Microsoft as well as Google, but it was meaningful that we were able to use those hours for AI learning.

However, despite this silver lining, the Sony CEO noted the inefficiency of having to keep cloud servers live 24/7 when most playtime is concentrated in the evenings.

In short, Yoshida-san didn’t sound worried about cloud gaming getting big in the short or medium term. It’s easy to imagine Microsoft lawyers citing his statement in court or as a publicity move to reinforce their argument against the CMA’s decision to block the $68.7 billion Activision Blizzard merger. After all, Sony’s PlayStation division has been the staunchest opponent to the deal, although it focused squarely on the importance of Call of Duty in the console market. However, even the CMA ultimately cleared that side of the deal, commenting that it wouldn’t make any financial sense for Microsoft to turn that franchise into an exclusive for its Xbox platforms.

The UK regulator only based its opposition on the potential effects the merger would have on the nascent cloud gaming market, despite the fact that most providers (like NVIDIA and Boosteroid) are in favor of the deal. Microsoft is appealing to the Competition Appeal Tribunal. However, rumor has it president Brad Smith will meet with UK Chancellor Jeremy Hunt and CMA officials next week to talk about the merger.