Sony (NYSE:SNE) recently announced that it will bring PS4 games to its Xperia Z3 smartphone and tablets via Wi-Fi Remote Play. The games will require a dual-shock controller to be paired to a phone via Bluetooth, so Sony will convert the Z3 devices into handheld consoles with an optional mount. However, the feature will not be supported over 3G or 4G connections.
Sony previously launched the same feature for the PS Vita, but this is the first time Sony is streaming its console games to smartphones and tablets. Let's take a closer look at how this unique strategy could be a great promotion for the company's fledging smartphone line.
PlayStation Mobile, version 2.0
This isn't the first time Sony tried to bring its PlayStation brand to smartphones. Its previous effort, PlayStation Mobile for Android, featured cross-platform games for the PS Vita on select Android devices. Sony's Xperia Play, which featured a slide-out PlayStation controller, was specifically designed for that purpose.
Unfortunately, PS Mobile failed since the cross-platform games had to be playable on the weakest Android device, instead of taking full advantage of the PS Vita's capabilities. Therefore, gamers who expected to play mobile versions of Resident Evil, Metal Gear Solid, and Final Fantasy were disappointed by the platform's paltry selection of lesser-known indie titles. Last month, Sony announced that it would finally pull the plug on the three-year-old service.
That cleared the way for Sony to replace PS Mobile with Remote Play, which is dependent on bandwidth speed (since the game is more like an interactive streaming video) rather than processing power. This also gives Sony a chance to boost Xperia sales by promoting its smartphones alongside the PS4, which has sold 10 million units sold since last November.
Why this is a great move for Sony
Merging those two markets makes perfect sense when we compare the past growth of Sony's gaming and mobile divisions.
Last quarter, revenue at Sony's Game and Network Services segment rose 95.7% year over year to $2.55 billion, thanks to strong demand for PS4 hardware and revenue from the PlayStation Network. The division also posted operating income of $43 million, compared to a loss in the prior year quarter.
Meanwhile, revenue at Sony's Mobile Devices division climbed 10.1% to $3.1 billion. However, the unit reported an operating loss of $27 million, compared to an operating profit a year earlier, partially due to higher marketing, research, and development expenses.
Sony's Xperia brand only claimed a 2.1% of the global smartphone market in 2013, according to research firm Gartner. Things could get even tougher this holiday season, as Samsung (NASDAQOTH:SSNLF) and Apple (NASDAQ:AAPL) launch new handsets, and cheaper Chinese brands gain market share in crucial markets like China and India.
But if Sony markets the new Xperia devices as new peripherals for the PS4, they could have a better chance at standing out in the crowded market of Android smartphones. Marketing expenses could also be reduced if the products are advertised together.
Sony's bold vision of the future of gaming
The only downside to this strategy is that Xperia Z3 devices could cannibalize sales of the PS Vita, which touts Remote Play as a major feature.
However, the PS Vita has only sold 8.8 million units in nearly three years on the market, compared to the 45.5 million 3DS units that Nintendo (NASDAQOTH:NTDOY) has sold in two and a half years. Since mobile gaming could eventually render dedicated handheld consoles obsolete, it's likely that Sony cares more about the future of Xperia than the fate of the Vita.
Adding Remote Play to Xperia phones also fits into Sony's bold vision for the future of gaming -- playing a single game across multiple devices. Sony is already offering us a taste of this strategy with PlayStation Now, its new cloud gaming network which will eventually stream PS1, PS2, and PS3 games onto the PS3, PS4, PS Vita, PlayStation TV, and certain BRAVIA televisions.
This means that when the PS4 is discontinued several years from now, the next PlayStation might not even be a physical console. Instead, it will likely be a cloud-based service which delivers Sony's entire PlayStation catalog to any Internet-connected device with a screen.
PS Now has some kinks in pricing and bandwidth requirements to work out, but Microsoft (NASDAQ:MSFT) and Nintendo have nothing that compares to Sony's PS Now, Remote Play, and Share Play (a new remote co-op mode). Microsoft is reportedly working on a predictive cloud gaming service known as DeLorean, but it's still in early development. Nintendo, on the other hand, believes that using its Amiibo figurines to ferry data between the 3DS and Wii U is a more practical cross-play solution than relying on Wi-Fi connections and the cloud.
A Foolish final word
Microsoft and Nintendo need to beware of Sony's long-term strategy. By the end of the eighth console generation, Sony gamers will likely be playing old and new PlayStation games on consoles, on TVs without consoles, on smartphones, and on tablets. If Sony realizes that vision, Microsoft and Nintendo will have a serious problem that launching new home consoles won't be able to solve.