Business & Economics

PS Now. Lessons from the Godfather of Cloud Gaming.


  • PlayStation Now (PS Now) is Sony’s cloud gaming platform launched in 2014.
  • In this article we delve into why PS Now appears to be on the back foot to Google’s Stadia and Microsoft’s Project xCloud, even though it has been around for eight years.
  • The acquisitions of Gaikai and OnLive shed light on the history of PS Now, and give us an insight into the challenges early on.
  • A look into Sony’s financial accounts offer an insight into how management view the future, and their plans for the next five years of cloud gaming.
  • In our final paragraph we calculate an estimate on how much Sony has spent on cloud gaming, and its revenues each year.

PS Now is Playstation’s cloud gaming platform. Launched in 2014 it is one of the oldest of such offerings and, remarkably, quite under the radar recently with the launch of Stadia and the announcement of Project xCloud.

This article will look at PS Now’s history and, using the recent Sony Full Year Annual accounts, review its challenges, successes, and Sony’s vision for the future of the platform.


Not to be confused with PS4 Remote Play, which allows you to play your games across local devices (i.e. streaming a game from your running PS4 to your mobile device), PS Now gives you access to a range of PlayStation games providing you with the option to either stream them from the cloud or download them onto your console. This is the type of product Microsoft are gunning for by combining xCloud with Game Pass.

PS Now was launched in July 2014. So, the question we asked ourselves was: why is it so under the radar? Why does it feel like Stadia and xCloud are pioneering cloud gaming, when Sony have been in the game for almost eight years now (development started in 2012)?

We begin the answer to these questions with a look into two acquisitions by Sony.

Sony Annual Accounts 2019 – PS Now History. Subscriber number as at March 2019.

Acquisition 1 / 2: Gaikai

The journey starts with the purchase of Gaikai in 2012 for $380m. Gaikai had been working on video game streaming technology since 2008, under the premise that once video games can be as easily accessible as music and movies, there will be no barriers to it becoming the number 1 form of entertainment in the world.

The platform was scooped up by Sony to form the foundations of PS Now. It was a very promising acquisition, hence the large price tag.

However Gaikai had one, potential, early flaw: the platform was mainly used to demo games. David Perry (co-founder Gaikai) was quoted asking a journalist not if the quality of the streamed game was good, but if the session was enough to get the user interested in buying that game. The platform never quite intended to be a full-blown ongoing streaming platform where gamers would exclusive play, but to simply advertise the games via demos.

While this is important to note – as it speaks of the quality and ability of the Gaikai platform to stream full games via the cloud – this model was not carried over to PlayStation. David Perry (who took on PS Now after the acquisition) wanted to step away from this demo model, as he mentioned publishers would rather players watched their trailers rather than sample gameplay before purchasing. Read into that as you may…

Using Gaikai technology, PS Now was launched in 2014.

They then made three critical business decisions:

  1. PS Now originally launched as a rental service. This was received poorly by gamers, who argued they could get a game (in particular) from GameStop at half the price it cost to rent it for four hours.
  2. Games were limited to 720p.
  3. They found themselves focusing their attention on a newer technology, VR.

Arguably, PS Now lost momentum for cloud gaming at launch by positioning badly with gamers and not producing a knock away wow experience. On the 720p front, David Perry argues that perhaps they were simply too early and the investment wasn’t there as the company got sucked into the promising future of VR (in all fairness Sony VR became the bestselling console accessory in history).

Cumulative spend on cloud gaming = $380m.

Acquisition 2 / 2: OnLive

Sony’s second acquisition was a cloud gaming company, called OnLive.

OnLive was founded in 2003, and by GDC 2009 it was one of the most hyped companies in video games. Game developers were so impressed at OnLive’s ability to cloud stream games, such as Crysis, during the GDC conference that they tried to pry open OnLive’s booth doors to see if the games were actually running from local servers.

However, by 2015 the company was in trouble. It was burning through $5m a month and, despite their website showing over 2mn users, the company allegedly (as quoted by internal employees) only had 1,600 concurrent users.

One of the issues was the inefficient use of resources. OnLive launched before so-called virtual GPU (graphics card) solutions were commonplace, meaning that each customer required a whole dedicated GPU, something that was very expensive and difficult to scale. Even when Nvidia presented a solution to this, the CEO Steve Perlman did not entertain it preferring to try and build in-house. As a result OnLive failed to live up to the technological expectations of its users, and importantly it’s investors who sought out scale.

Interestingly Nvidia used this technology to release Nvidia Grid in 2012 and then the now well-known Geforce Now platform.

Another issue was that OnLive CEO Steve Perlman was quite a complicated individual, and it is widely believed he drove the company to the ground. One of the allegations is that he cancelled the exclusive deal they had with EA games after discovering there were EA demos already on their rival platform — Gaikai.

In the end OnLive IP and cloud gaming patents were scooped up by Sony in early 2015 for an undisclosed sum, and then OnLive was officially liquidated later that year. Sony cannot have paid much for this IP considering OnLive, once considered to be valued at $1.8bn, was sold to venture capitalists a few years earlier for $4m (with $40m of debt on the balance sheet).

It might be generous, given the full year financial accounts for Sony during that year (2015) show an increase in intangible assets by $66m, but we assign the same $44m price tag to OnLive for the Sony acquisition.

The OnLive acquisition was important to Sony, as the IP helped fast-track support for PS Now onto Bravia and Samsung TVs as well as Blu-Ray players. It was, however, less important than Gaikai.

Cumulative spend on cloud gaming = $380m + $44m = $424m.

Learning from the two acquisitions

  • Gaikai helped initiate PS Now, but the technology was only able to handle 720p, so wasn’t compelling enough for gamers yet.
  • Business decisions on how to sell the platform lost momentum by not providing sufficient value to gamers through the rental model.
  • OnLive taught us lessons about publisher relationships and that Steve Perlman’s fallout with near enough all developers that put their game on Gaikai may have been its ultimate downfall.
  • Sony, in always forward-thinking mode, may have been carried away with VR and didn’t focus their strategy or marketing on PS Now.

PlayStation’s management view on Cloud Gaming

Stepping away from the past and into the future, the recent Sony annual accounts (both YE 2019 and YE 2018) offer an insight into where Sony predicts cloud gaming will go and the future of their platform.

The key messages:

Sony are building capacity for 5 million gamers.

They are targeting better quality, and most importantly allocating more budget to marketing. This is a clear indication of where they see the market going. The next gen console is expected to fast track growth of cloud gaming.

“PS Plus and PlayStation Now (PS Now) subscriber numbers have significantly increased.”

This quote wasn’t particularly helpful, as no numbers were given. However, we can assume the number is over 1mn, given we were told in the 2019 accounts that they had 700k PS Now Subscribers growing at a compound annual growth rate of 40% year-on-year (some reporters are confidently listing a figure greater than 2mn thanks to the lockdown) This is broadly putting them on track to 5mn PS Now gamers by 2024.

720p quality and minimum 5mbps.

Although this keeps PS Now accessible, arguably it will struggle in quality versus new rivals Stadia and xCloud. Sony management have expressed a desire to move beyond this and will begin to invest.

Partnership with Microsoft

One of these investments in better quality is through a partnership with Microsoft. This could help scale PS Now as it will aid in increasing quality and capacity, as they will be able to access to critical MSFT cloud infrastructure.

They have over 780 games on the platform.

This is pretty impressive, and their semi-boast in the annual accounts that it takes no effort by the developer to place their game on PS Now is important. It will make relationships easier to manage and encourage more developers to put their games on the cloud.

Management strongly believe in gamer choice.

Their business model into the future remains to offer games via a choice of mediums: physical discs, downloads, or streaming. This means we should still expect hardware to be key for the foreseeable future.

Hardware generates about half the revenues of software.

Perhaps not an unsurprising statistic, but whilst hardware is important it is clear from the full year account statements for 2017, 2018 and 2019 that for every 1mn Yen you create from hardware sales, Sony generates 2mn Yen in software sales. If this was reversed then we would be concerned about how keen Sony would be to invest in new cloud gaming systems that could cannibalise console sales.

Sony’s 2020 Annual Accounts – Hardware and Game Software Sales in millions of Yen
And for interest:
  • There have been time challenging developments on the quality assurance side of launching PS5, due to testers unable to test the console at their homes, but Sony stress that there is no reportable impact on video game software development due to the COVID-19 situation.

Hopefully this bodes well to game releases this year from Sony, and perhaps a PS5 release. We are curious to see if they can overcome the quality assurance challenges.


Adding up the cumulative acquisition numbers we have been tallying so far in this article, Sony have conservatively paid $500m for their PS Now cloud gaming capabilities.

At a current run rate of 1mn users paying $9.99 a month = $120m a year, this investment will take roughly 4 years to pay back. However, we don’t include the goodwill such an offering creates, for example the minority of gamers who may be steered to PlayStation over Xbox due to the ability to stream games on PS Now. On top of this clearly Sony are hoping to double down on cloud gaming in the next generation and bump that revenue figure up 5x, which will make it a very compelling revenue generator for the company.

Will PS Now be successful?

The key lessons we have learnt so far from other cloud gaming platforms such as Nvidia GeForce Now, Gaikai, and OnLive is that content is king. PS Now have to create not only a technologically-compelling reason to play in the cloud, but a fun and enjoyable one. Gamers need to feel they are getting an experience they could not get on local hardware, and this involves persuading top developers to put games on the platform, encouraging them to use cloud technologies to their advantage when developing a game.

Some pundits argue that Sony had eight uncontested years to woo developers onto their cloud gaming platform. Now Nvidia GeForce Now, Stadia, xCloud, and Amazon are all jumping onto the scene they may have lost their best opportunity yet.

In all, we are pleased when researching this article that the focus is now clear amongst Sony management. PS Now is here to stay, and here to grow fast.