Sony Unveils New PlayStation Now Streaming Program; GameStop Shares Drop Sharply

Ever since Sony cut a major deal for the Gaikai cloud gaming service, pundits have watched to see how the company would integrate the technology into the PlayStation product line. At CES this week, Sony finally took the wraps off that announcement and the initial program looks amazing. The upcoming PlayStation Now service will stream games from central servers to the PS4, PS Vita, PS3, TVs, tablets, and smartphones. Sony says PSNow will be supported on "most" of its upcoming 2014 Bravia televisions, but hasn't announced any additional partnerships with specific hardware vendors.

The company claims that users will be able to "stream popular hits and classic games from the PS3 library, first on PS4 and PS3 systems, followed by PS Vita." There's no mention of PS1 or PS2 classics and, apart from the Bravia mention, no word on exactly which smartphones, tablets, and other devices will support the feature. Sony claims that it will initially rent games on a title-by-title basis, or offer a subscription service that allows users to "explore a range of titles."

The Fine Print

There are several major hurdles Sony will need to conquer to make PSNow truly take off. They are:

Pricing Used games are typically cheap. So are used, previous-generation consoles. Yes, being able to take an old game anywhere is valuable, but exactly how valuable depends on the game in question. If a used copy of a game goes for $9.99, rental prices will need to be low to make it an attractive option. Many gamers are active collectors, as evidenced by the success of Nintendo's Virtual Console strategy, and would prefer to own the games in a given series as opposed to renting them.

Device Support: Sony has previously tried to launch PlayStation-certified devices through the PlayStation Mobile program. There's a reasonable number of third-party products besides its own Xperia line, but none of them have set the gaming world on fire. A service like PSNow could offer a huge library of titles to mobile devices, but the phones and tablets themselves will need to offer suitable controls or support for third-party controller peripherals. Streaming games fixes the problem of local storage and rendering horsepower and is probably kinder to battery life, but the ergonomic challenges still need to be met.

Existing Library Integration: Sony could kick digital distribution via streaming into overdrive if it offers free game streaming across multiple devices for games the user already owns. Digitally purchased PS3 titles attached to a PSN account should automatically become available without a per-title rental charge. This was the great idea at the core of Microsoft's otherwise-terrible Xbox One initial unveil, and with PS Now ramping up in 2014, Sony should take advantage of it.

Content: It's a little surprising to me that Sony is only talking about the PS3 at this point. While it makes sense to offer high-profile PS3 games to PS4 early adopters, there are tons of classic, low-bandwidth games that enjoyed huge fanbases in their day. A revamped Final Fantasy IX, Chrono Trigger, or Siphon Filter 2? Sign us up.

GameStop Shares Plunge:

GameStop shares shed 10% of their values on the strength of Sony's announcement, dropping from $48 to $4 before rebouncing slightly up to $45. The move reprents investor fears that the company won't be able to maintain its position at core of the retail console movement. GameStop's stock is up nearly 78% year-on-year, however, which means the company can weather the drop -- provided it unveils some sort of challenging position.

Playstation Now's rental focus may actually be a deliberate decision not to go head-to-head with retail shops. If you prefer collecting and owning titles to renting them, and Sony doesn't add an ownership feature to the service, then GameStop doesn't have to worry about seeing its profit margins erode.