Sony's cloud gaming deal with Microsoft blindsided its own PlayStation team

When Sony Corp. unveiled a cloud gaming pact with archrival Microsoft Corp., it surprised the industry. Perhaps no one was more shocked than employees of Sony's PlayStation division, who have spent almost two decades fighting the U.S. software giant in the $38 billion video game console market. Last week, the companies announced a strategic partnership to codevelop game streaming technology and host some of PlayStation's online services on Microsoft's Azure cloud platform. It comes after PlayStation spent seven years developing its own cloud gaming offering, with limited success. Negotiations with Microsoft began last year and were handled directly by Sony's senior management in Tokyo, largely without the involvement of the PlayStation unit, according to sources familiar with the matter. Staff at the gaming division were caught off guard by the news.