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PlayStation Now: The Beginning of the End for Console Gaming?

By Rex Moore and Evan Niu, CFA – Feb 9, 2014 at 5:00PM

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Sony’s new Netflix-style streaming service offers completely cloud-based gaming.

With the new PlayStation Now, Sony (SONY 0.84%) is first out of the gate with a cloud-based streaming game service that changes the rules of the game. With a distribution model very similar to that of Netflix (NFLX -2.04%), PS Now could even herald the end of game-console hardware as we know it.

On the scene at this year's Consumer Electronics Show in Las Vegas, Foolish tech analyst Evan Niu got an up-close look at the new service. He joins Rex Moore to tell the story of what could become the "Netflix of gaming."

A full transcript follows the video.

Gaming for investing gains
The immersive gaming experience is just one reason you know cable's going away. But do you know how to profit? There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names. Hint: They're not Netflix, Google, and Apple.

Rex Moore: Evan, you saw some interesting stuff with Sony. Tell me about that.

Evan Niu: Sony announced the PlayStation Now. It's a new game streaming service that looks pretty interesting. Sony bought a company called Gaikai back in 2012 -- a streaming company -- and now they're finally going to launch the service. It allows you to stream PlayStation 3 games to TVs, smartphones, and tablets, and it's all based on the cloud.

It's a pretty impressive performance. For a game that's really graphically intensive -- 3D stuff -- streaming completely from the cloud and being able to control it, it was pretty impressive. You would expect some performance lags, and in some cases if you don't have a good connection you might see some, but if you have a pretty solid connection, it's actually a pretty good experience.

They're going to be testing out different pricing models, like renting versus subscription, so they're still going to try to figure it out there. This isn't something that Microsoft (MSFT -0.04%) (with Xbox) has done yet, in exactly this way, so I think it's going to put some heat there.

Moore: As the performance does get better -- and we know it will, over time, on things like this -- are we looking at the demise of console gaming?

Niu: I wouldn't go that far, but it definitely removes the need for having the actual hardware console, so that definitely is a long-term possibility because eventually, if they can get this performance good enough, you could do away with the hardware -- keep all the hardware in the cloud and virtualize everything -- just stream it.

Then if you could build this new model on it, how to monetize it, if you can generate recurring revenues as a subscription ... it's kind of like the Netflix of gaming.

Moore: Yes, that's true. Okay.

Evan Niu, CFA has no position in any stocks mentioned. Rex Moore owns shares of Microsoft. The Motley Fool recommends Netflix. The Motley Fool owns shares of Microsoft and Netflix. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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