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Sony's PlayStation Now Service Is the Latest Attack on GameStop

Sony's (NYSE: SNE  ) plans to debut a streaming gaming service have been in the works for a while now. The company's 2012 purchase of Internet gaming pioneer Gaikai saw it take a shortcut to its desired goals and acquire the resources of a company that had already established a cloud framework. But announcements at this year's CES expo show that Sony's vision for its streaming service is broader than most had anticipated. Not only will the service be available on PlayStation 3, PlayStation 4, and PS Vita, it will also be accessible on mobile platforms, tablets, and smart TVs as well.

The company's recently-unveiled PlayStation Now service has the potential to be huge and is one of the first signs that Sony is testing the waters outside of the traditional console gaming models. It's also the latest in a series of signs that are worrying for GameStop (NYSE: GME  ) . Is the gaming retailer stuck promoting a product that is ultimately contributing to the company's inevitable decline?

Thanks for the launch parties, GameStop
The successful launches of the PlayStation 4 and Microsoft's (NASDAQ: MSFT  ) Xbox One gave reason for optimistic takes on GameStop's outlook. News that the PS4 sold 4.2 million units in 2013 shows that there is substantial enthusiasm for a new line of consoles. Microsoft's 3 million Xbox One consoles in 2013 is also nothing to sneeze at. GameStop is undoubtedly thrilled to be a major channel for the sale of these new consoles, but its livelihood is actually tied to the sale of software and its used game model. Now, console manufacturers like Sony and Microsoft and software publishers like Electronic Arts (NASDAQ: EA  ) and Activision Blizzard are diverting money away from GameStop.

Microsoft was this close to going rogue
For years, used game sales have been a hot-button issue in developer and publishing communities. Companies like Electronic Arts have cited lost revenue resulting from used games as a motivating factor for efforts to derive more income from online titles. The Xbox One's original product vision saw anti-used-game mechanisms implemented and online connectivity requirements that represented a serious threat to GameStop. Confronted with a swell of negative pushback from online communities and GameStop itself, Microsoft's reaction was almost to go entirely digital with the device and ditch physical media entirely. Mr. Softy wisely backed down, but the paramount success of its Xbox Live platform has demonstrated the green pastures that exist outside of traditional retail channels.

They used to be so good to each other
One of the few constants in the otherwise topsy-turvy gaming industry has been the relationship between console manufacturers and retailer outlets. Both need hardware to succeed so that software can be sold, and a mutually understood symbiotic relationship has guided past console cycles. Now, companies like Sony and Microsoft look to pull the rug out from underneath their convenient ally GameStop. The company's model for at least the next five years is closely tied to the success of these consoles. But for Sony and Microsoft, growth will largely be found in services and online sales that circumvent GameStop.

The modern quest for a quality stream
The quality of Sony's PlayStation Now streaming service is going to play a huge part in how adoption shakes out. One of the issues that may complicate the draw of streamed games is latency. Even assuming a perfect connection, games will be slightly less responsive. Connectivity and server issues have already proven to be issues with comparable online networks as well. If Sony gets the service right, PlayStation Now has the potential to be revolutionary.

Players will have the option to pay a comprehensive subscription fee that allows them to try many games, which makes it the closest thing to a Netflix-like model in modern video games. There will also be the option to rent individual games. The gaming industry is experimenting with new revenue models out of necessity. Microsoft is working on a cloud-based gaming service of its own, and the company will undoubtedly release more details early in the new year. That Sony's PlayStation Now service goes into beta testing this month is impressive; that a full release is planned for summer has to be irritating to GameStop. Its price fell 8.37% on the day of the news.

Now and later
The gaming industry still needs retail, but the relationship is changing. GameStop will be coming to the table with an increasingly weakened position, but the console manufacturers still have an interest in preserving a balance. With the PlayStation 4 posting impressive numbers and the upcoming expansion of the broader PlayStation ecosystem, the PlayStation Now service becomes one to watch as a sign of things to come.

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Read/Post Comments (19) | Recommend This Article (2)

Comments from our Foolish Readers

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  • Report this Comment On January 14, 2014, at 5:48 PM, Expert01565 wrote:

    Xbox Live already streams original, 360 and even old Nintendo and sega So how is this so great,, the 360 started this years ago..and Xbox Live is way more reliable than PSN!!!100K Servers to Sonys what 40K at most...

  • Report this Comment On January 14, 2014, at 5:52 PM, anash91 wrote:

    Expert, are you refering to games originally produced on the Nintendo, or Nintendo games? You aren't clear

  • Report this Comment On January 14, 2014, at 6:46 PM, Ahlfs wrote:

    XBox and Nintendo don't stream there games lmao, they sell and put up retro games you can download just like you can already on the PSN.

    Xbox fanboy probably still thinks the Xbox One graphics are as good as the PS4 still to huh?

  • Report this Comment On January 14, 2014, at 7:23 PM, chrismireya wrote:

    @ Ahlfs: Yes, the graphics on the Xbox One are just as capable as the PS4. Anyone with even a hint of computer knowledge will admit this. Of course, Sony fanboys are so bitterly loyal to their Asian company that they HATE anyone who speaks the truth.

    I like the PS4. However, its network is lacking and its game selection is paltry at best (according to my tastes).

    All of the games that I am interested in are available on the Xbox One and PS4...with a few exceptions. I'll take Halo and Titanfall over the "exclusives" on the PS4 anyday. That isn't to say that the PS4 is bad. It isn't. It is a great console. Competition is great...because it drives down the price of our consoles of choice.

  • Report this Comment On January 14, 2014, at 9:56 PM, annorytaxpayer wrote:

    Like how they keep saying its an attack on Gamestop. gamestop has been surviving for years. they have no debt and Bestbuy has been trying to buy them out for years. And now they are saying Sony and Microsoft are out to run them out of business.

  • Report this Comment On January 15, 2014, at 7:49 AM, Jarky wrote:


    Maybe there's a reason this site's called the Fool.

    Really, they leave themselves too open.

  • Report this Comment On January 15, 2014, at 9:19 AM, eQil1 wrote:

    It is not an attack on Gamestop, it's the evolution of digital media. Nobody is saying digital media is an attack on blu-ray so why a streaming video game service is an attack on gamestop. Physcial media is a dying form, everybody knows this. Gamestop & other services like Gamefly are going to have to evolve with the times. Easy solution for them is to create their own digital service like netflix and/or hulu. It could be just like any one of the many apps you can put on your console. Of course they would have to offer some incentives for their services like free dlc or special editon items like gamestop does now but it would just have to be shipped to you. A complete digital media world is right around the corner & other companies have to evolve it's as simple as that.

  • Report this Comment On January 15, 2014, at 9:37 AM, rgramos21 wrote:


    "Yes, the graphics on the Xbox One are just as capable as the PS4"

    Sure. They just have to lower the resolution in order for the XB1 to match the PS4. Anyone with even a hint of computer knowledge will know this.

    " I'll take Halo and Titanfall over the "exclusives" on the PS4"

    So you're taking Titanfall as a good game already even though it's not even out and new IP? That game needs to prove itself first. And for your info, Sony owns way more gaming studio than MS. If you think XB1 will have more and better exclusives in the future, you're in denial.

  • Report this Comment On January 15, 2014, at 10:27 AM, ChuyG wrote:

    Today players are a bunch of clowns. Companies such SONY and Microsoft do this bullsh1t because they know people is stupid. Digital games idea is stupid. The download price for the game is 60 digital and physical, but once I get bored of the game I can go and sell it, but how can I do that with a digital copy? I can't. So how is this a good idea?

  • Report this Comment On January 15, 2014, at 1:49 PM, BlackTar wrote:


    You seriously have no idea what you speak of. Coming form a guy with not a little but a lot of Dev experience on multiple systems over the last 15 yrs I'll be the second to say you just make stuff up.

    Of Course Xbox fanboys are blindly loyal to a company with more anti-Consumer and Anti-trust cases then any other company over the last 25yrs. Yet and yet you still believe them.

    Or i don't the simple fact that Azure servers are not just for gaming but almost every future product Microsoft will sell you and heres a hint 95% of that isn't Console related.

    Lets touch on the fact they have showed zero real world application for the cloud running.

    Lets touch on Network are you saying that ps4 network is lacking to xbox one? Cuz that is a lie and i bet you have zero knowledge if prodded for what that means besides running to your google search bar right now to educate yourself.

    Have a good day but know you sound like a little fanboy huddled behind pillows closing your eyes and plugging your eyes.

  • Report this Comment On January 15, 2014, at 1:52 PM, BlackTar wrote:


    I agree about the price. But once (if ever) we get to a steam like movement on consoles then it wouldn't be so bad.

    On Ps3 i DL games becasue i could split them with a buddy(something not possible in the same fashion with the new systems)

  • Report this Comment On January 16, 2014, at 5:27 AM, deathstoner wrote:

    This xbox vs playstation is idiotic. BOTH these companies are charging outrageous prices for their consoles. You can seriously go build a computer rig with twice the power for the same price, better graphics (What you're arguing about) and the widest selection of games in the industry. PC is the only gaming platform that is truly innovating the industry, all games on consoles have became generic starting with the PS3/360 generation. You have games like CoD, Battlefield, Assassins Creed, I could go on and on, the point I'm trying to make, all of these games are relatively EXACTLY the same, REGARDLESS of what console you play them on. There are no "Exclusive" games to a console, it might have a different name, different characters, different mediocre story, but it is still the same gameplay over and over again.

    Anyway digital media is the future. I've know that this is where the industry is heading since I first checked out the game streaming service ONLIVE, if you have a half decent internet connection it is nearly flawless. As consumers we MUST demand price cuts for these games that are already too expensive, not even taking into account the fact that they are practically all the same with different skins.

    To be honest with you, consoles are dead UNTIL the revolutionary new features are here. But we're still a good 5-10 years away from controlling avatars with brain helmets. Until then Everything is going to be stale in the industry. All these companies are doing is sucking all of you fanboys dry, Sony, Microsoft, EA, Ubi, Activison, every last one of these companies are con artists. The console wars were introduced by these companies, for their own profits. Wake up. We're all gamers that are being taken advantage of. Stop arguing with eachother and demand better quality products or stop playing 60 dollars for new skins and graphic "Improvements" that are HARDLY noticeable.

  • Report this Comment On January 16, 2014, at 5:53 AM, Cerberus82 wrote:

    The biggest downside to GameStops previously owned/trade in policy is the fact it is a rip off! Just a quick example, last year Resident Evil ORC was released, yes HUGE failure, however they made their money. I pre ordered it, got it on release day, played it for maybe an hour and realized how terrible it was. I went back to GameStop to trade it in (on launch day mind you) they offered me $7!!!!! Needless to say I walked out with the game still in hand. I went back about a week later to purchase a new controller and out of curiosity I looked over the used games shelf only to see a used copy of ORC priced at $50! How there was a $43 mark up is beyond me, but that's greed.

    The other downside to being a gamer these days is you never purchase a FULL GAME anymore. You pay $60 for a new release, get home and find that you need to spend anywhere from $5-40 more for the DLC to unlock the entire game. Again greed! Whatever happened to beating a game and unlocking the "hidden content" and not being forced to pay for it?

  • Report this Comment On January 16, 2014, at 7:48 AM, nemisis0 wrote:

    When you buy digitial media it's not totally yours. You can't sell it or buy used which is a major blow to consumers. Also if this world got rid of all physical media you will be at the mercy of the retailers, period. They could inflate the prices and you will have zero say in it because there will be no used market for games because it won't exist. Games can also be 25gigs in size and they are only going to get larger with time with what history tells us. So if you have a slow connection then good luck trying to download a 25 gig game never the less 20 of them or so for the year and you better pray your connection doesn't cut out during the download or get corrupted or you will start all over again not to mention other bad things can happen. I wonder what the people who want games but don't give a damn about an internet connection will do? Very little people have a true fiber connection which is what you will need for this type of heavy downloading. Physical media has been around ever since it has been created and will always be around because frankly consumers aren't that stupid to let companies keep ownership of products even after you buy them with your hard earned cash. Then there is problem with hackers. Hackers brought down sony ps3 online for over a full month. Physical media is the safest, best route to go for consumers, there are so many pros for them it's ridiculous why they would want an only digital media world.

  • Report this Comment On January 16, 2014, at 10:03 AM, bames13 wrote:

    It likely means gaming is about to get more expensive than ever. Not only will you have to pay for playstation plus you will need to pay an additional monthly subscription fee for playstation now. So rather than ever being to own rights to a game and keep it permanently without further cost/tax you will borrow it at whatever premium they set and have to perpetually rent the content. If it is a game you really love and keep for a long time you will likely end up paying more for it than you would have via purchasing a physical disc or a complete digital download. That also goes without mentioning that the game streaming model may get even more costly due to the loss of net neutrality (Thanks Verizon). Providers can choke/block netflix, amazon, ps now etc bandwith and/or charge more and that will all be passed on to the end user.....making physical media non-streamed media as a much better model for gamers

  • Report this Comment On January 16, 2014, at 10:14 AM, Farscape29 wrote:

    @Nemisis0 & bames13 - Completely agree with your comments. I just don't see how an all digital platform would work, not with current Internet speeds, not with current Internet provides. Look at the net neutrality decision recently made. So if these ISPs decide that dowloading more than one 8-15 GB program per month kicks you into a higher cost per month bracket? And aside from that, echoing your statement, what about speeds over all? I think my speed is decent, but even an 8GB game takes about 8+ hours to download. Throw on top of that what if it's a 'midnight release' and everyone is trying to pull from the same servers at the same time. And @bames13 point as well concerning ISPs blocking/choking services that depend on streaming or consistent high speeds or making you pay more in order to access those services at viable speeds.

    I don't see physical versions going away for most of the reasons you state. An all digital marketplace is just not viable or really wanted right now. Not by me at any rate.

  • Report this Comment On January 16, 2014, at 10:58 AM, Afrizone13 wrote:

    Goodluck to those gamers in Africa that do not have good internet connection and are reallying on physical media.

  • Report this Comment On January 16, 2014, at 8:40 PM, deathstoner wrote:

    You guys are not understanding what STREAMING a game is. You are NOT downloading the game.

    Essentially it is NETFLIX FOR VIDEO GAMES.

    Look at it this way. You decide to play a game with the service, the game is inserted into a console, you gain control of that console with your console, and the actions you make with your controller are sent to that console, then the video feed of that console is sent back to your TV. BOOM. The future of gaming. No need for costly consoles that PC's have twice the power of for the same price in a couple months if not instantly.

    It will not take up much more internet juice than watching netflix currently does, if you can watch netflix in HD, then you can take advantage of this service with your current internet speeds.

    In the future when Bluray disks can no longer hold all the data needed to create the game, streaming is the cure all for this problem, because it's stored on a server with theoretically unlimited data.

    Net neutrality is a big issue, BUT these BIG CORPORATIONS like Sony and Microsoftt will certainly get some sorta deal worked out.

  • Report this Comment On January 16, 2014, at 8:42 PM, deathstoner wrote:

    And obviously.. obviously, it isn't going to go completely digital. Not yet. You guys are LITERALLY saying what the movie industry was saying 5 years ago.. You're all 15 huh

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