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Business deals

Sony and Microsoft set rivalry aside for cloud gaming alliance

Console war veterans join forces against the likes of Google and Apple

Microsoft and Sony plan to jointly develop a cloud gaming service, though the Xbox and PlayStation will continue to compete with each other.   © Reuters

TOKYO -- Sony and Microsoft, bitter rivals in the video game console wars, will team up in on-demand gaming to better compete with newcomers like Google as the industry's main battlefield looks poised to shift to the cloud, Nikkei learned Thursday.

During a recent trip to the U.S., Sony President and CEO Kenichiro Yoshida signed a memorandum of understanding with Microsoft CEO Satya Nadella on a strategic tie-up. While details have yet to be hammered out, the partnership will center on artificial intelligence and the cloud, according to an announcement by Microsoft early Friday Japan time.

The latter category includes plans for joint development of cloud gaming technology. While this market is expected to grow as ultrafast fifth-generation wireless gains traction, such services require much processing power on the provider's end to deliver games with high-quality graphics and minimal lag. Sony and Microsoft plan to leverage the American computing behemoth's data centers for this purpose.

The two companies, along with Nintendo, long dominated the gaming landscape. But the rise of mobile gaming has brought competition from such other players as China's Tencent Holdings, which publishes the mobile version of the wildly popular PlayerUnknown's Battlegrounds.

Also moving onto their turf are big tech companies that already have the powerful server networks needed for effective streaming as well as massive built-in bases of potential customers. These include Google and its planned Stadia cloud gaming platform, as well as Apple, which announced the Apple Arcade subscription service in March.

The emergence of new rivals and technology spurred the Sony-Microsoft team-up, though it will not mean an end to the console wars. The PlayStation and Xbox brands will continue to compete.

Outside gaming, the two companies will consider combining image sensors from Sony -- which controls half the global market -- with Microsoft AI technology to develop electronic "eyes" for self-driving vehicles. They will also discuss incorporating Microsoft's Cortana virtual assistant into televisions, speakers and other Sony products.

The tie-up is an indication of Sony's shifting strategy. The Japanese company is focusing resources on areas where it can effectively use its strengths, such as games and image sensors, and becoming more open to partnerships in other fields.

Microsoft hopes to use the alliance to strengthen its cloud business and gain an edge over Google and Amazon.com.

This is not the first time Sony and Microsoft have worked together. They announced collaborations in home electronics in 1998 and music distribution technology in 1999. This wider-ranging tie-up aims to help both compete more effectively in a fast-changing environment.

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