Microsoft and Sony announce deal over cloud gaming and AI

Both companies will explore joint development of future cloud solutions in Microsoft Azure

Console rivals Microsoft and Sony have announced a partnership on cloud-based solutions for gaming and artificial intelligence.

As part of the agreement, both companies will "explore joint development of future cloud solutions in Microsoft Azure" to provide gaming and content-streaming services to their customers.

Sony will use Microsoft's Azure servers and data centres to host its PlayStation streaming service, including PlayStation Now (game-streaming service) and PlayStation Vue (Internet-based cable TV service).

The two parties will also work together to create improved development platforms for content creators.

The new partnership surprised the gaming industry as Microsoft and Sony have been fierce rivals for almost 20 years ever since the launch of first Microsoft Xbox, which pitched Microsoft into direct competition with Sony's popular PlayStation 2. PlayStation is one of Sony's most profitable divisions.

Microsoft said the partnership will enable them to provide better entertainment experiences to customers worldwide.

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A "memorandum of understanding" in this regard was signed on Thursday.

Microsoft and Sony said they will also work together in the areas of AI and semiconductors as well. Specifically, the focus will be on developing "intelligent image-sensor solutions."

The plan is to develop intelligent image-sensor solutions by using Sony's image sensors in combination with Azure AI in a hybrid manner across both the edge [ie: client devices, such as games consoles] and the Azure cloud.

The aim is to provide improved capabilities for their enterprise customers through their joint efforts.

The two companies said they want to provide user-friendly and highly intuitive AI experiences to customers, and will explore the integration of Microsoft's advanced AI tools and platform with Sony's consumer products.

Microsoft has been a key business partner for us, though of course the two companies have also been competing in some areas

The new deal on cloud-based gaming comes just as Microsoft is planning to launch its own streaming platform, xCloud, in the near future. The platform, according to analysts, will challenge Google Stadia, although it is not yet clear how it would impact Sony's PlayStation Now platform.

"For many years, Microsoft has been a key business partner for us, though of course the two companies have also been competing in some areas," said Kenichiro Yoshida, president and CEO of Sony.

"I believe that our joint development of future cloud solutions will contribute greatly to the advancement of interactive content," he added.

"Additionally, I hope that in the areas of semiconductors and AI, leveraging each company's cutting-edge technology in a mutually complementary way will lead to the creation of new value for society."

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