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PlayStation Now: Sony's potential exit strategy out of the console market

Sony’s purchase of the video game streaming service then known as Gaikai Inc., has now reemerged as PlayStation Now. The announcement was made at CES 2014 which ran from January 7-9.

SCEA President Andrew House, announcing PlayStation Now.
SCEA President Andrew House, announcing PlayStation Now.
Photo by Ethan Miller/Getty Images

"We are thrilled to deliver entertainment experiences only possible from PlayStation through our new streaming game service,” said Andrew House, President and Group CEO of Sony Computer Entertainment Inc. “PS Now will allow users to engage in the world of PlayStation, whether they’re existing fans or have never owned a PlayStation platform."

The service not only allows for streaming to game consoles, but the service will allow for less specialized hardware to run resource intensive games. Such a demo was shown on the PlayStation Vita. The Handheld showcased “The Last of Us” an action game said to push the PlayStation 3 to its graphical limits. More intriguing is the impact this particular service can have on Sony’s game console business.

If games can be streamed from any given device, at any given time. What is the use of purchasing the PlayStation 4 or Vita? When you can access game titles via a Smart TV, Tablet or handset? These are the questions Sony has failed to answer, but yet this may also be their answer to long-term profitability.

The manufacturing of consoles is a very expensive venture, a recent teardown of the PlayStation 4 reveals the bill of material to be $381 per console. Sony retails the PlayStation 4 for $400, this puts Sony on the negative side of the balance sheet.

The Hardware business does not define the PlayStation brand, the software does. Investors will undoubtedly look at the performance of the on demand service following its release in the North American territory this coming summer.