Could Cloud Gaming Kill The Next-Generation Video Game Console?

Ryan has spent more than five years covering business, research, and telecom-related subjects for a variety of publications based in New York and San Francisco. Ryan currently works as a writer for TechCrunch. → Learn More

That said, there are a few arguments against selling a dumb appliance with processing done in the network. The big one is that doing so would dramatically reduce hardware sales forthwith — however that ignores the fact that broadly speaking those boxes are sold at a loss. No one makes money off new hardware in the first several years it’s released, if ever. Providing a box with just-good-enough connectivity and graphics rendering capabilities, and making it available cheaply, would be a more profitable step and would drive a lot more volume than building some sort of high-powered God Box and selling it for $299.

More importantly, even though, no one has shown that cloud-based gaming can be done at true scale. OnLive has several million subscribers, however its true reach pales in comparison to the number of Xbox Live gamers who sign in daily. Providing the type of computing power necessary to serve tens of millions of gamers all playing then is a big problem. In spite of the GaiKai acquisition, Microsoft might be better equipped to deal with it than Sony, as the software giant has already built a giant virtual computing platform in the cloud with Microsoft Azure. For Sony it would mean a huge investment just to get the infrastructure to support cloud gaming ready.

Finally, there’s the potential cost to consumers, as ISPs begin to roll out tiered broadband plans, which charge consumers more for excessive bandwidth usage. Since games would be streamed in HD, that means a huge amount of bandwidth per month for even somewhat casual gamers. And no one — not Sony or Microsoft — wants to roll out a service which is going to create huge cable bills for their best clients.

Making gaming a streaming service in other words than based on the physical purchase of games as well opens up new potential business models. Xbox Live already has a membership fee attached, and subscription games — where you get the software for free but at that time pay a monthly fee to access the game online — are nothing new, particularly in the MMORPG world. However without the need for physical downloads or actual distribution of discs to consumers, subscriptions could become furthermore popular for cloud-powered games.

The leading manufacturers of electronics

Sony is one of the leading manufacturers of electronics, video, communications, video game consoles, and information innovation products for the consumer and professional markets.

Microsoft, founded in 1975 by Bill Gates and Paul Allen, is a veteran software company, best known for its Microsoft Windows operating system and the Microsoft Office suite of productivity software.Starting in 1980 Microsoft formed a partnership with IBM allowing Microsoft to sell its software package with the computers IBM manufactured. Microsoft is widely used by professionals worldwide and largely dominates the American corporate market.Additionally, the company has ventured into hardware with consumer products just as the Zune and...