[UPDATE 2] We got in touch with Dave Karraker, SCEA's Sr. Director, Corporate Communications who explained to GameDaily BIZ that Xfire has been in discussions with Sony Online Entertainment, NOT SCEA. The deal would potentially incorporate Xfire's technology into SOE's PS3 title Untold Legends: Dark Kingdom, but Xfire's tech would not serve as an overall solution for the PlayStation Network Platform. That said, it's entirely possible that such a wide-ranging deal with Xfire could still be brokered, but Karraker couldn't tell us more.

While Sony has yet to fully disclose their online plans for the PlayStation 3, a transcript from a Viacom Q2 earnings call sheds some light on how the company may counter the popular Xbox Live service from Microsoft.

As you may recall, Viacom actually purchased social networking service Xfire for $102 million back in April. Now Viacom is apparently putting Xfire to good use as part of the PlayStation Network Platform, which Sony is positioning as an alternative to Xbox Live for online console gaming. "Importantly, Xfire just signed a deal with Sony to create a version of their platform for the new PS3, which will now enable Xfire to extend its reach further into the huge console gaming market," stated Viacom President and CEO Tom Freston.

With a strong brand like Xfire and the likelihood that Sony's online service will be provided free to players, Sony will immediately gain a strong foothold in the online arena, though it will be tough for them to overtake Xbox Live's lead. Sony's PlayStation Network Platform will likely offer a number of features similar to those found on Xbox Live, and possibly more. Xfire's software currently includes functions such as a server browser, friend tracker, in-game instant messaging and voice chat, file and patch downloads, and profiles. Sony also has talked about the PS3 and general entertainment in the past, so it's not out of the question to think that they'll offer music, movies and television shows via their online platform as well.

Much more information regarding Sony's online plans is expected to be revealed at this year's Tokyo Game Show later this month. We've contacted SCEA and Xfire and we'll update this story once confirmation and/or more details are provided.

Thanks to 1UP.com for the tip.

[UPDATE 1] Xfire CEO Mike Cassidy would neither confirm nor deny the news, but he did tell GameDaily BIZ, "As soon as I have info that's been approved to share, I'll be sure and let you know," which could be viewed as a confirmation of sorts. We're still awaiting word from SCEA. Stay tuned.