Videogames Reach for the Cloud

Originally published July 10, 2012

By Ian Sherr

For decades, consumers have played videogames in arcades, on personal computers or specialized consoles hooked to televisions. Sony Corp. SNE +2.21% is placing a bet on a different approach—technology that streams games to Internet-connected devices.

Last week, the Japanese electronics maker announced a $380 million deal to acquire Gaikai Inc., a company that runs games on servers in its data centers. The technology lets gamers play fast-action, visually sophisticated titles through a Web browser—without the need to install specialized game software or buy hardware with special graphics circuitry. Players can use laptops, tablets, smartphones or even some TVs.

For Sony, the acquisition presents an opportunity to expand beyond its PlayStation 3 videogame console, whose growth has slowed in recent years since launching in 2006. Global sales of traditional consoles are falling as more people move online to play games.

Sony’s move is a vote of confidence in the nascent technology, commonly called cloud gaming. The first prominent entrant, OnLive Inc., launched in 2010 following nearly a decade of development. Since then, a handful of competitors have sprung up, including Gaikai, an Aliso Viejo, Calif., start-up that launched in January 2011.

But game industry executives also say the technology still has technical and financial hurdles to pass before it becomes a truly viable replacement for traditional game machines.

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(Published July 10, in The Wall Street Journal.)