As OnLive struggles, Sony reveals it's working with Gaikai to resolve issues around cloud gaming

In the battle of the cloud gaming companies Gaikai, headed up by Earthworm Jim designer Dave Perry, is the clear winner.

Last month Sony shelled out a whopping $300 million for the company. Last Friday OnLive collapsed, sacking half its staff and selling all its assets to a new investor amid reports of just 1800 concurrent users.

This morning, cloud gaming's star seems dimmed. But for Sony, proud owner of Gaikai, its belief in the potential for the tech remains unhindered.

"Definitely we see huge potential that cloud gaming can bring to the PlayStation ecosystem," Sony Worldwide Studios boss Shuhei Yoshida told Eurogamer at Gamescom last week.

"There are more things we can do than what we can realistically achieve. So we have to be very careful. What's the most important thing to provide? What's the content? And what's the target device combination?"

Sony's plan for Gaikai remain shrouded in mystery. Just days after the deal was announced, Perry told Eurogamer he intended to meet with his new paymasters to encourage them to put his service in all things PlayStation - including the PlayStation 4.

Yoshida declined to go into detail on Sony's intent, but he did say the current generation of PlayStation products - PlayStation 3 and PS Vita - were perfectly capable of integrating the tech.

"Cloud gaming is not future technology. It's current," he said. "It's already in service. It's just a matter of getting the internet infrastructure that's robust enough and fast enough for a greater amount of people. It's still limited in terms of what's required to be able to play games through the internet."

He added: "Games become something in the future, like when you watch YouTube. That's an amazing service. You have instantaneous access to an almost infinite amount of content. Compared to the current experience - you have to download gigabytes of data, you have to wait 20 minutes, 30 minutes or a couple of hours, and you have to go through the installations and patching. That can potentially be removed."

OnLive, like Gaikai, has suffered criticism for the inherent limitations of cloud gaming. Lag is perhaps the chief concern, but compounding this is the uptake of high-speed internet - still not pervasive throughout the world.

"Of course there are limitations," Yoshida admitted, "in terms of responsiveness, latency and required bandwidth. But I'm very excited we're able to work with the best talent in the industry who are trying to solve the issues that's inherent in cloud gaming.

"In the future we are sure cloud gaming as a service will offer some additional great experiences to millions of people."