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PlayStation 3 Missteps Cause Executive Shuffle

27 Apr, 2007 By: John Gaudiosi

The horrible start that Sony has had with its next-generation PlayStation 3 console — which continues to sit on retail shelves at its $600 price while consumers gobble up PS2s, Wiis and Xbox 360s — has likely played a role in the executive shuffle at Sony Computer Entertainment Inc. (SCEI).

Ken Kutaragi, the man who created all three PlayStations and ushered in Sony's dominance in the video game industry, will step down as chairman and group chief executive June 19. This follows his December stripping of day-to-day responsibilities as president of Sony's video game unit. Kutaragi will continue to serve as an honorary chairman of SCEI and serve as a technology advisor to Sony Corp. Chairman and CEO Howard Stringer.

Rising star Kazuo Hirai, who has spearheaded the growth of Sony's PlayStation brand in North America at Sony Computer Entertainment America since PlayStation's launch in 1994, has been named president and CEO of SCEI.

“I think Kutaragi's departure is a loss for Sony,” said Michael Pachter, video game analyst for Wedbush Morgan Securities. “He's a true visionary and will be difficult to replace. With that said, it appears that the company doesn't perceive as great a need for a visionary as it had in the past. They should be (and are) focused on execution, and making sure that all of the parts mesh well together (film, consumer electronics and games) with the PS3/Blu-ray player.”

Pachter doesn't think Kutaragi can be blamed for the PS3's slow start. Blu-ray wasn't his idea, and he's not known for his collegial/collaborative skills set.

“If he had his way, I'd venture a guess that the PS3 would have launched a year earlier for $200 less, and would have competed favorably against the Xbox 360 (the Wii would still have been a phenomenon),” Pachter said.

Billy Pidgeon, program manager, consumer markets: gaming, IDC, said Kutaragi is primarily a brilliant engineer and his work with the PS3 was complete before the first unit rolled off the line. He said he can retire at the top of his game in confidence that he has changed the dynamics of the games industry.

“He was directly responsible for all three iterations of the PlayStation as well as the PSP, and we can thank him for the complexity and richness of the 3-D console gaming we now enjoy and for the control interface hardcore gamers know intuitively underneath their fingertips,” Pidgeon said. “The successor to the PS3 is unlikely to be released before 2012, and Sony's resources are now needed for the Playstation network and for PS3 software development, not for PS4 design.”

Kutaragi made backward compatibility a must-have feature for consoles, whichhad the effect of doubling the expected lifespan of Sony's game consoles.

”The PS3 has had comparatively slow starts to the first and second PlayStations, both of which launched to unprecedented aggressive uptake which is now expected from a new console,” Pidgeon said. “With a 100 million-plus viable installed base that continues to move more software and is the currently the primary competition for all the new consoles, the PS2 is inhibiting the PS3's sales performance. The PS2 had the advantage of the added value of DVD playback, a desirable media upgrade where Blu-ray is not for the PS3.”

Price is not the only factor playing into Sony's troubles. Aside from Resistance: Fall of Man and MotorStorm, Sony has not released exclusive PS3 games that have enticed gamers to buy its $600 hardware. Sony sold its first console on the strength of exclusive games like Resident Evil and Tomb Raider and PS2 hardware received a boost from exclusives like Final Fantasy, Disney's Kingdom Hearts and Grand Theft Auto games. PS3 has not had that, and because Sony is no longer the leader, many publishers are bringing franchises like Grand Theft Auto over to Xbox 360 for day-and-date launches — something that was unthinkable with PS2 and Xbox.

Innovative games and unique motion-sensor gameplay has propelled Nintendo to the top of the game field. Sony shipped (not sold) 1.84 million PS3s worldwide through Dec. 31. Nintendo sold 3.19 million Wiis during that same time period, and more would have been sold if Nintendo could keep up with a demand that continues to outpace production.

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