Tencent and Sony step up investment in cloud-gaming initiative

Tencent Holdings Ltd. and Sony Corp. are beefing up their bet on cloud gaming by joining the latest fundraising round of Japanese venture Ubitus K.K.

Ubitus, which specializes in cloud-gaming technology and services, said Wednesday it completed a round with investments from Tencent, Sony Innovation Fund by IGV and Square Enix Holdings Co., without disclosing the amount raised. The investors put in about $45 million at a valuation of less than $400 million, a person familiar with the matter said, asking not to be identified because the details aren’t public.

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Tencent has been stepping up its efforts to foster cloud gaming, which allows consumers to enjoy high-end games without owning expensive hardware such as consoles or computers. Just as Netflix streams movies, cloud-gaming services deliver games from servers over the internet to users’ TVs, smartphones and other screens. Tencent said on Monday that it was helping OOParts, a Japanese cloud gaming platform, to capitalize on the technology.

Yet cloud gaming has faced challenges even as wireless connections get better, with most enthusiasts sticking to titles that use gamers’ own hardware. Excitement provoked by Alphabet Inc.‘s Google didn’t last long as its Stadia service ran into challenges with communication latency and plan pricing. Stadia has shrunk much of its ambitions and Jade Raymond, a game industry veteran who was a marquee hire for Stadia and recently left, has set up a studio to work on a PlayStation game.

“Cloud gaming longer-term will ease the development burden of making games for multiple platforms, expand gaming into new geographies and drive higher subscription revenue, but it remains a ways off from being a main platform,” said Matthew Kanterman, an analyst at Bloomberg Intelligence.

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Despite the skepticism, many video-game platform owners see potential in the technology and predict it can co-exist with console-based business models. Sony offers PlayStation Now and Microsoft Corp. has Project xCloud, both of which provide streamed games to subscribers.

Ubitus, founded in Taiwan in 2007 and now based in Tokyo, is a major provider of cloud-gaming solutions. Its partners include Nintendo Co., which offers cloud-based versions of Capcom Co.’s Resident Evil and Ubisoft Entertainment SA’s Assassin’s Creed on the Switch. Square Enix uses the startup’s technology to run its popular Dragon Quest X online multiplayer role-playing game. Ubitus’s cloud-gaming patents are often praised for low latency.