Sony's Blu-Ray Breakthrough

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for about $499.) "We think the biggest factor here is that simplification has become possible through a reduction in the parts count, leading to a reduction in costs," Ezawa wrote in a Dec. 27 report.

Warner's shift to Blu-ray is a gift for Sony's videogame business. The console's sales have picked up in recent months after Sony cut the price in October, introduced a $399 model in November, and lowered the fees it charges game developers in a bid to broaden its games offering. But it still trails Nintendo's Wii, which also launched in November, 2006. Last year in Japan, for instance, Nintendo's Wii console outsold Sony's PS3 3-to-1, according to Tokyo market researcher Enterbrain. Macquarie Securities predicts Sony will ship just 9.2 million consoles this fiscal year, not the 11 million the company has forecast.

Stringer Likely to Stay CEO for Three More Years

Until now, gaming enthusiasts have been the console's main buyers. It didn't take much to convince them that the Blu-ray discs were ideal for cramming in more of the richly detailed pictures and realistic sound that the PS3 had been designed for. But for anyone else, splurging on a PS3 would have meant gambling on one of the DVD formats. There's less risk in that now, which gives Sony a chance to bill the PS3 as an affordable Blu-ray player that's also a gaming machine, connects to the Internet, and comes with a hard-disk drive for downloading games, videos, and music.

Stringer will be glad to have one less distraction to deal with. Last month, at a roundtable discussion with reporters in Tokyo, he suggested that he would be at the helm for another three years. He'll want to devote himself to rolling out an online channel, like Apple's (APPL) iTunes store, that can deliver Sony's huge library of movies, music, and games to all kinds of gizmos—and not have to spend time explaining why Sony still has problems.

With Cliff Edwards, in BusinessWeek's Silicon Valley bureau