PlayStation boss axing a troubling sign for Sony

Stan Beer
Monday, 30 April 2007 05:22

Your IT - Entertainment

Ken Kutaragi may have engineered the phenomenal success of the first two models of PlayStation but it appears it is a case of third time unlucky for the CEO and chairman of Sony Computer Entertainment. With PS3 sales still limping along, the longstanding games console boss has been forced into premature retirement from his position at the beleaguered company.

Sony and Kutaragi maintained solidarity in the official press announcement of his retirement. However, there is little doubt among analysts that the so-called father of the PlayStation was at least in part finally brought undone by the less than inspiring market performance to date of the premium priced PS3.

While production problems and disappointing sales of the PS3 were not the only troubles to hit Sony Corp over the past 12 months - battery recalls spring to mind - the games console space was an area where Sony dominated for the past decade. The indications are that Sony appears to have misjudged the market this time.

At US$600 (and even more expensive price points in other Western markets), Sony is losing massive wads of cash with each console sold - analysts say around US$300. The inevitable and necessary price cuts will exacerbate the losses.

As in the past, Sony expects the shortfall to be recouped through licensed games sales. However, PS3 exclusive games are still in short supply and, with poor console sales, there is less incentive for developers to bring new titles to market. Many PS3 owners are still playing mainly PS2 games on their expensive new consoles.

Admidst all the turmoil, however, Sony had appeared to keep its cool, presenting a front as if it was all part of a grand master plan. Aside from an unexpected pre-launch PS3 price cuts in Japan, there have been no further cuts elsewhere despite evidence that price has been a significant inhibitor to PS3 sales in all markets.

Kutaragai's forced departure has fractured this steady as she goes image Sony tried to project. It has become clear that management, led by Sony Corp CEO Howard Stringer, has been highly dissatisfied with the PS3 marketing effort. It is significant that Kutaragi's replacement Kazuo Hirai is software focussed rather than a hardware focussed engineer like his predecessor.

The placement of Hirai at the helm is a signal from Sony that to dig itself out of its current hole it needs to bring PS3 games and more PS3 games to market as soon as possible. Otherwise, one year from now, Sony may find that its best selling console is still the PS2.