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Theories On Why Sony's Kutaragi Is Movin' On

Posted by: Kenji Hall on December 1, 2006

Ken Kutaragi’s move to hand over daily oversight of Sony’s video games unit to Kaz Hirai has got the rumor mill working overtime. Given the timing of the announcement, I suggested in a story yesterday that Sony’s top execs may have tired of Kutaragi’s glitch-plagued PlayStation 3 launch. Howard Stringer & Co. may have wanted to crack down on the division and felt they could only accomplish that by forcing Kutaragi, known as a maverick and a brusque leader, to let a team player take over.

Here are a few others I’ve heard:
Spin off the gaming division. It’s highly unusual to appoint a chairman for a division within Sony. The gaming unit, Sony Computer Entertainment Inc., has always had a great deal of autonomy. It’s even based in own building, designed by Kutaragi, across town from HQ. But Sony might want to spin off the games division, to insulate the rest of the company from the cyclical nature of the gaming business. If that happens, Sony Computer Entertainment would have to raise its own capital, spend its own cash on R&D, and answer to its own investors. In a good year, games can bring in a third of Sony’s profits, or more. Not this year. You’ll recall that the PS3’s launch (and delays) is one reason Sony’s operating earnings this year are expected to fall short of last year’s. The timing of the games division’s expected operating loss of $1.68 billion is bad for Stringer because he’s in the midst of trying to fix Sony’s core consumer-electronics division.
No PS4? Kutaragi has had such a huge impact on the PlayStation’s past success that it would foolhardy to stay the course without his daily input. Sony’s naming of heir-apparent Hirai, a marketing whiz who led the company’s push into online gaming, could signal the end of the PlayStation hardware era. The PlayStation brand could be all about software from here on out. PS3 could be PSFinal.
PS3’s 4D Universe. If you believe Sony’s official line then Kutaragi’s new post will allow him to focus on turning the PS3 into the ultimate in digital entertainment for home. Right now it’s still just a gaming machine and a high-definition DVD player. To get beyond that, he’ll need to seal all kinds of deals with content providers, not just game developers. Sony has its own Hollywood studio but that’s not enough. It will want more movies, music, TV shows and video blogs than any other “channel.” That’s the way the PS3 will ever have a shot at replacing the PC as the digital hub of the home. Kutaragi has also talked a lot about a 4D world, in which we “live” through avatars in a video game alternate reality which obeys the rules of physics found in the real world. Think of a more realistic “Second Life.” (Do we really want that?) For that, he’ll certainly need time away from the daily paper shuffle.

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