Sony’s PS Now Isn't the Netflix of Cloud Gaming, It's the Blockbuster

Sony (SONY -0.33%) recently launched the beta of PlayStation Now, its cloud-streaming service for game rentals. PS Now streams PS1, PS2, and PS3 games onto PS3, PS4, PS Vita, PlayStation TV, and select BRAVIA televisions. Only PS3 games streamed to the PS4 are available during the beta period.

The service, which allows players to rent games for various amounts of time, has been nicknamed the "Netflix of gaming." Indeed, the idea is similar -- taking a product that was once physical, making it digital, and allowing customers to instantly access the title over the Internet. Unfortunately, when we dig deeper into PS Now's business model, we see that the service is a lot more like the Blockbuster, not Netflix, of cloud gaming.

PS Now. Source: Sony.

Illogical pricing
Sony designed PS Now by mirroring the logic of physical movie rentals. A physical disc costs around $10-$20, while a physical rental at Blockbuster used to cost $2-$3 per day. That made sense prior to Netflix's arrival, since films could be watched in around two hours. Modern video games, on the other hand, often require 10-20 hours to complete.

Keeping that in mind, let's take a look at Sony's rental prices for some games compared to their physical counterparts, and the time necessary to complete them.

Sources: GameSpot, GameStop, Amazon, Game Lengths.

Sony's current rental prices simply don't offer a good enough deal compared to used physical copies of the games. In addition, physical discs can be played without an active Internet connection, yet PS Now requires a constant 5 MB/s connection to maintain lag-free gameplay. That massive bandwidth usage could be a major problem, considering the net neutrality and paid peering issues that Netflix has experienced with Comcast, AT&T, and Verizon.

More important, time-metered gaming simply isn't fun. Gamers don't want to be pressured to finish a game within a certain a time limit. That concept goes against the idea of completionist achievements that hardcore gamers love. It also removes the concept of physical game ownership while placing total control of the game in Sony's hands.

EA Access is a better idea
PS Now's high prices also compare poorly against Electronic Arts' (EA -0.65%) EA Access, a new subscription-based plan for Microsoft's Xbox One that offers "all you can play" games for $30 per year.

EA only offers a handful of older games, like Battlefield 4 and FIFA 14, but the membership also includes 10% discounts on EA digital games and early access to upcoming games like Dragon Age: Inquisition. Sony recently turned down EA Access for PlayStation Plus, stating that it wasn't a "good value" for PlayStation gamers. But from a consumer standpoint, if EA rolls out more older titles for EA Access, $30 per year is a much better value than paying Sony's steep à la carte rental rates for individual titles.

This doesn't mean that PS Now will never become a subscription-based service. Sony stated that the beta launch of PS Now was intended to get a better grasp of acceptable subscription rates. But judging from the high prices of à la carte rentals, Sony intends to aim a lot higher than EA Access' $30-per-year rate.

The big picture
When we look beyond Sony's awkward pricing tiers, we can see that PS Now is actually an ambitious attempt to dissolve its entire console gaming platform into the cloud.

A gamer in the near future will be able to simply turn on an Internet-connected TV, then instantly stream a video game like an interactive YouTube video. All the heavy graphics processing will be handled by cloud-based servers, meaning that bandwidth, not raw GPU power, will be the most important part of future gaming.

That's why Sony is so eager to roll out PS Now for BRAVIA TVs. If it can successfully put all of its PlayStation game libraries into the cloud, customers can play any of these games from any Sony platform without the original hardware. When sales of the PS4 eventually dry up in a few years, Sony can move its entire PS4 library into the cloud, making it accessible to any PS Now member.

The Foolish takeaway
Simply put, PS Now could eventually become the ultimate system of backwards compatibility, but the gaming market might not be ready for such a dramatic change. Unless Sony can offer an attractive flat subscription rate that is more like Netflix than Blockbuster, gamers won't pay to play a game for a few hours when they can own a used copy for roughly the same price.