PlayStation3: All About the Games

Can new Sony gaming chief Kaz Hirai's focus on games help close the gap on Microsoft and Nintendo? A price cut might help

by Kenji Hall

Kazuo Hirai is repeating himself—again. He has been asked about Sony's (SNE) marketing plans for the PlayStation 3 video game console, the prospect of movie and music downloads, and his strategy for catching rivals Microsoft (MSFT) and Nintendo (7974.T), and every time his answer is the same. It's all about the games. "The most important message as we go into the holiday season is to communicate to consumers that the PlayStation 3 is a video game machine," Hirai said in an interview with BusinessWeek, leaning forward in his chair to emphasize the point.

Since taking over in June as the company's gaming chief, Hirai has gone after the 18- to 35-year-old diehard gamers who are most likely to spend $499 to $599 on a PS3. That has meant beefing up the console's relatively skimpy library with must-have games. This fiscal year through next March, Hirai expects to triple the number of titles, adding 200 new games, including 180 for download-only, to the 100 available. The hope is that hotly anticipated games such as Metal Gear Solid 4, Lair and online-only titles like SOCOM: Confrontation will drive console sales.

To speed in-house game development, Hirai announced on Sept. 28 that Sony had bought Britain's Evolution Studios and its subsidiary Bigbig Studios. And taking a page from Linden Lab's hit online world Second Life, Sony has plans to let users create avatars—or digital three-dimensional versions of themselves—that will inhabit an interactive online space, called Home. (Home was supposed be ready this year but has been delayed until next spring.)

Anything Is an Improvement

Many analysts applaud his efforts. Yet despite Hirai's focus on games, some developers remain skeptical. The problem, they say, is that after its launch in November, Sony initially sent out mixed signals about the PS3, suggesting the console was an all-around entertainment system, complete with a high-definition Blu-Ray DVD player and Internet browser, while rivals Microsoft and Nintendo made it clear their machines were all about gaming. "[The PS3's future] will be tough if its marketing strategy isn't straightened out," Yoichi Wada, president of Japanese game company Square Enix, told reporters last month.

Almost anything the 43-year-old marketing whiz (BusinessWeek, 4/30/07) does will improve the mess he inherited from his predecessor and PlayStation founder, Ken Kutaragi. The division's $2 billion operating loss last fiscal year marred what otherwise might have been an impressive company-wide comeback. And while the gaming unit's finances will improve this year, NikkoCitigroup reckons losses will still top $1 billion. Sony's other divisions are making money.