Mar 18, 2017
Recently Sony made headlines, and some diehard fans unhappy, when they revealed that their streaming service PlayStation Now would start to deliver PlayStation 4 exclusives. The service was also removed from smart TV systems and the older PlayStation 3 and Vita models due to the new offering being integrated, and for good reason. But the main driver of the outrage by some was the fact that the service will remain on Windows. This means that most, if not all PlayStation 4 exclusives will be playable on Windows eventually, much like how Microsoft moved towards this with native Xbox Play Anywhere.

This, however, isn’t surprising. Since the PlayStation 4 launched it has remained the only bright spot on the Sony balance sheet, raking in profits for the company since launch, with over fifty million units sold during the last four years. However, this train will eventually grind to a halt if Sony doesn’t figure out how they can keep the cash rolling in without having to spend billions on research for the next PlayStation system. Sony already released the PlayStation 4 Pro which hasn't exactly set the world on fire, and the PlayStation VR system met a similar fate, with even Sony opting for the HTC Vive when building new experiences and showing off games at gaming expos recently. Not to mention the likelihood of a future where PlayStation is outmaneuvered by a competitor and fails to sell any significant number of units, much like the original Xbox One.

During the last quarter, hardware sales were down 14% (in revenue terms) and software sales skyrocketed by 39%. With Sony bringing their software services to Windows and expanding this library by offering PlayStation 4 games, and locking in potential customers with the subscription fee, makes it a great move by them to secure the current trend for the division. Microsoft has seen success with their Xbox Play Anywhere offering, with more and more publishers offering their games within the service. With Xbox games going to both Xbox and Windows 10, increased sales for all these games and improving the likelihood of developers opting for the platform as a whole when it comes to exclusive games.

If Sony were to become increasingly successful with this service, they could offer exclusive game launches within the service and deliver PlayStation 4 exclusives directly to all gamers without any delay to increase the likelihood of gamers opting for the subscription instead of buying the game once-off, much like how Phil Spencer discussed this future for the Xbox Game Pass subscription currently in preview.

PlayStation hasn't had this type of offering in the past, with their devices being quite disparate in their ability to run the same games. With PlayStation Now, Sony can take on Microsoft and offer both PlayStation gamers and Windows gamers a wide library of titles for around $10 a month and remain relevant in a world where gamers are becoming more device-agnostic.

This gives Sony access to gamers who wouldn’t normally buy a PlayStation console and solidify their already stellar software sales revenue. With that, it also builds a solid foundation on to where Sony can expand their line-up in the future by offering more graphically intensive games on the PlayStation 4 console even after its support has run out, increasing the player base. This is something Microsoft haven’t addressed even with their latest offerings, relegating players to keep purchasing new hardware after their support dried up.

Hardware sales aren’t a great way to look for growth in the console space since the market is extremely competitive and prices continually drop to find new customers, and whenever new hardware launches gamers tend to gravitate towards the newer hardware and sales generally drop quickly as many would rather wait than purchase the older hardware (see Xbox 360 sales after Xbox One launched). Sony knows this and opted to go the software only route. Therefore in the future, I see them turning PlayStation into a software-as-a-service offering instead of having to compete in the highly competitive hardware market and growing their revenue stream sustainably.

Microsoft, on the other hand, opted to offer gamers increasingly powerful hardware and the ability to choose which device they want to play on, be it Windows or Xbox. It remains to be seen which service will win out in the end. We can only look towards how quickly the libraries of each grows when support from publishers increases. Microsoft might, as network speeds improve, also opt to offer their line-up of games on a streaming service if PlayStation Now becomes a success.
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