April 26, 2007 1:16 PM PDT

Sony says sayonara to father of PlayStation

Sony says sayonara to father of PlayStation
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PlayStation creator Kutaragi resigns

April 26, 2007
It appears the disappointing PlayStation 3 has claimed its first executive victim inside Sony.

Sony and PlayStation creator Ken Kutaragi made a joint statement Thursday saying Kutaragi would retire from his position as chairman and group CEO of Sony Computer Entertainment as of the company's next shareholders meeting on June 19, and that he has "been considering this decision for some time."

"I am happy to graduate from Sony Computer Entertainment after introducing four platforms to the PlayStation family," Kutaragi said in a statement.

Kutaragi is one of the most celebrated figures in consumer electronics history, having shipped more than 200 million PlayStation and PlayStation 2 consoles, as well as the PlayStation Portable. Some analysts believe that had the PS3 been perceived as a hit or even a mild hit, there's a good chance he would be sticking around for the full 10-year lifecycle Sony gives its consoles.

But the PS3 is widely seen as a commercial flop, given its third-place position among next-generation video game consoles, trailing Microsoft's second-place Xbox 360 and the surprising leader, Nintendo's genre-busting Wii. The PS3 is even trailing sales of the venerable PlayStation 2 at this point.

The "PlayStation 3 has been a huge disappointment, No. 3 out of three in terms of console sales," said Rob Enderle, principal analyst at the Enderle Group. "It's been a huge embarrassment for the firm, and a huge hole that money has been pouring into."

Console sales in March
Number of next-generation video game consoles sold in March in the U.S.
Nintendo Wii 259,000
Xbox 360 199,000
PlayStation 3 130,000
Source: NPD Group

Enderle said despite Kutaragi's massive success with previous iterations of the PlayStation, he probably couldn't survive the very public drubbing the PS3 has gotten in the market so far.

"When you go from superstar to walking disaster, there are few executives that can survive that," Enderle said. "You're only as good as your last financial report, and while he was given some leeway (with the PS3) there were obviously some huge mistakes."

Enderle said the biggest of those mistakes--the pricey inclusion of the Blu-ray player in the PS3--may well have been forced on Kutaragi by others at Sony.

The Blu-ray player added hundreds of dollars to the console's cost, making it, at a top price of $599, far more expensive than the $399 top-end Xbox and $250 Wii--and also making it much later to market than planned.

"It really is Blu-ray that killed him," Enderle said. "As a result, the product was too late and expensive, and that did a huge amount of damage to their sales volume."

At the same time, Nintendo's Wii has stolen the video game industry's thunder, leading the next-generation console wars with 259,000 sales in March, according to The NPD Group, largely on the strength of its innovative motion-sensitive controller. By comparison, the Xbox 360 sold 199,000 units in March, and the PS3 trailed far behind, with only 130,000 sales.

Yet for some, it may even be surprising that Kutaragi survived the Sony restructuring that saw the ascendance of CEO Howard Stringer. Kutaragi in many ways represented the "old" Sony. He was big on vision--he saw the PlayStation line as a vehicle that would allow Sony to take over electronic entertainment in the home--but the projects sometimes didn't live up to the vision.

Ken Kutaragi unveils the look
for the PS3 controller in May 2006.

The PlayStation 2 was instrumental in accelerating demand for DVD players and discs. The player, however, didn't become an all-encompassing media server. The long-anticipated console vs. PC war never materialized in the way many expected. People bought PlayStations, but continued to go to their PCs when they wanted to get on the Internet or send e-mail.

The PlayStations have also proven expensive to produce, largely because of elaborate, customized silicon. In 1999, the processor and the graphics chip inside the PS2 took up 239 and 279 square millimeters in surface area, respectively, which made them relatively large (and hence relatively expensive) chips for their time. Sony often spoke of how the processor inside the PS2, called the Emotion Engine, would be used in other computers.

The constant chip improvements defined by Moore's Law allowed Sony to drop the cost of its components. By 2004, the two chips were condensed into one that took up only 87 square millimeters, almost one-sixth the size of the prior chip. But neither the Emotion Engine nor Sony's graphics chip threatened Intel's or anyone else's chip markets. Computer makers did not pick it up.

CONTINUED: 'More hits than misses'…
Page 1 | 2

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Blu-Ray is why I bought PS3
I don't know if I agree with what this article implies. The one and only reason I bought a PS3 was because it came with a Blu-Ray player. I actually bought a standalone BR player first and returned it when I found out the PS3 was a cheaper BR player AND it outperformed any standalone BR player on the market. Maybe I'm the exception rather than the rule but there was one more PS3 sold because it had BR, not the opposite.

Coincidentally I just read an article on this site day before yesterday that Blu-Ray Discs are outselling HD-DVD 3 to 1. Don't tell me the fact that PS3's have built in BR players has nothing to do with that.

I guess the bottom line is good for Sony, bad for this guy that "retired."
Posted by sjit (2 comments )
Reply Link Flag
I'm with you
For me Blu-Ray is a selling point. But currently there are no games out (for any of the new consoles) that I find compelling. Once they have a new Final Fantasy game for the PS3 I am buying one.
Posted by Siegfried Schtauffen (269 comments )
Link Flag
Germane Question For Most Folks Is ...
The germane question for most folks is, would they have bought a PS3 w/o Blu-Ray if it had been $150-200 cheaper?

In addition, your reference to Blu-Ray disks outselling HD DVD is off a little--70% to 30%. Much of that is attributable not to players, but to content: There are more movie studios hawking Blu-Ray than HD DVD.

mark d.
Posted by markdoiron (1138 comments )
Link Flag
and the reason..
..why hundreds did not, not everyone has that much spare change. With HD peneration still so low how many care for HD DVD players.
Posted by FutureGuy (742 comments )
Link Flag
You, not the rest
You said it: you are the exception, not the rule. As simple as that. Most people who buy a PlayStation 3 buy it to play games, not to watch movies. They don't want to be forced to have something they don't need/want.
Posted by Fil0403 (1303 comments )
Link Flag
Blu-ray is the only reason to buy PS3 today
And that is the problem.
The PS3 is BD-player that plays a few games, not a gaming console that happens to play HD media.
In a market that is a lot more price sensitive than Sony imagined (no, we will *not* take on a second job to buy one, Mr Kutaragi), the PS3 offers no compelling reason for gamers to buy it.
This may change but not soon.
Not at $600.
The price has to drop by 50% before this duckling can fly and that is not happening soon enough, no matter what the pundits say; brand loyalty is simply not *that* powerful.
Posted by -fjtorres- (226 comments )
Reply Link Flag
I used to be sony all the way
But at 600 dollars, It's like buying a new PC, only I can't actually use it like a PC. So that's no use. I could play my old games on it, but I already have a PS2, so that's no use. I don't have an HDTV yet because there's not much you can really watch on it yet (who wants to watch broadcast TV, it looks terrible on an HDTV). So that's no use.

And what's worse, there's no good games on it. Oh wait, there'll be persistent online games, but I absolutely hate online games. The only type I've ever cared for is FPS games, but only because that is a simple competition... which is easily ruined by cheaters, but there you go!

No, Sony and MS both have lost this gamer to Nintendo this round.
Posted by mattumanu (599 comments )
Link Flag
oh please...
Rob Enderle is <sarcasm> such a respected member of the analyst community that I fully respect his views here.</sarcasm> ...cough*ms shill*cough...

I own a PS3 and I'll agree that Sony have botched the delivery, pricing, marketing, and bundling of this thing, but it'll be around longer then the Wii and looks damn sexy standing beside my 100cm LCD, with no wires and 'add-on' bits hanging off it like a 360.

Maybe Rob could show a little respect to the man who has had such a great influence on the gaming community for the last decade. Ken, enjoy your retirement...
Posted by dateman (9 comments )
Reply Link Flag
Its still uglier
Even without the 'bits dangling off it' the PS3 is still a far uglier George Foreman Grill of a console than the 360... Not to mention its over priced with inferior games and graphics too.
Posted by richto (895 comments )
Link Flag
Its still uglier
Even without the 'bits dangling off it' the PS3 is still a far uglier George Foreman Grill of a console than the 360... Not to mention its over priced with inferior games and graphics too.
Posted by richto (895 comments )
Link Flag
Looks can be deceiving
Your PS3 looks good and that is all it does.

This guy stepped down for a reason. Had the PS3 been a success he would have stuck around. But it is a failure. MS and Wii has it beat in all areas of gaming. I say gaming because that is what it was made for. Not to watch movies. Not to Surf the web. and not to be a beautiful paper weight(This is what you use it for)

Come on over to the 360 we will still accept you.
Posted by abarnes112 (7 comments )
Link Flag
Don't you mean...
...[i]enforced[/i] retirement?
Posted by make_or_break (3747 comments )
Link Flag
Game choice rather than price
I would say that the lack of decent games is a bigger hit to PS3
rather than price. Everyone touts the price, but from my
perspective I don't quite understand that.
PS3 is $600 in the US, thats the same price as PS1 and PS2 at
launch in the UK & sales in Europe were not affected by that.

xBox360 has some great titles, GoW for example. But the PS3's
offerings are sadly lacking beyond a few decent launch games
(Resistance, RR7, Motorstorm) 6 months in & I still don't see
anything very inspiring on the horizon. Where is MGS, where is
GTA. This is the reason, IMO, rather than price.
Posted by Riquez-001 (171 comments )
Reply Link Flag
The games will come
Sony as well as their top third-party supporters have dropped the ball with not having enough games from their top franchises around within the first 6 months of launch. Games are what drives console sales. PS2 had the benefit of being a fairly cheap DVD player to drive sales. A lot of people would agree that next-gen movie formats have come about a little earlier than needed, and will take longer to become universally adopted than the VHS to DVD movement.

But once again, a great game library is what will drive the console sales. That's why, as you will see is not noted in the story, PS2 is still outselling all next-gen systems (280,000 in March).

The writer as well as many comments are attempting to discredit all that Kutagari has done for the console gaming industry, saying he's basically being forced out of the game. Disrespectful, to say the least.
Posted by spm82 (59 comments )
Link Flag
Enderle: bzzt
""It really is Blu-ray that killed him," Enderle said. "As a result,
the product was too late and expensive, and that did a huge
amount of damage to their sales volume."

Last I checked their sales volume looked fine. They're in the
games industry, you know. As long as people are buying PS2's
hand over fist, it doesn't really matter that the next-gen players
haven't taken off yet. Since they have the luxury of waiting --
something your darling Microsoft clearly does not -- it's not
nearly as simple as you try to make it out to be.
Posted by ciparis (41 comments )
Reply Link Flag
This is the world all about.
No one is going to be praised for what they did 10 years back, it would only show up on your obituary. You are placed in a powerful position or sacked based on what you did yesterday. Sad but there is the way of life.
Posted by pjianwei (206 comments )
Reply Link Flag
HD n00bs
BD discs outsell HD DVDs only because you guys are just getting into the game now and have to get all the movies you like.
Posted by DustinSnell (9 comments )
Reply Link Flag
HD n00bs
BD discs outsell HD DVDs only because you guys are just getting into the game now and have to get all the movies you like.
Posted by DustinSnell (9 comments )
Reply Link Flag
BR Sales - PS3 outlook - HD
My understanding is that Casino Royale is being given away with new PS3 so there is a direct link between it's sales and PS3 sales and since it is No. 1 it looks like the PS3 has an effect.

I expect that my Christmas the landscape will be very different. Price drops should have happened, new and better games should be released. Developers will have more experience of working with the actual hardware and not just emulators. Come back to me in January 2008 and we'll see what the situation is then.

Finally, for HD. There isn't enough content for me to persoanlly invest in a HD TV and HD Player (either type), so at the moment neither the XBOX360 or the PS3 are a compelling buy.
Again, I expect my Christmas this situation may change and luckely it should also line up with the price reductions...
Posted by ahickey (177 comments )
Reply Link Flag
errrm no
What you mean is that giving away hundreds of thousands of copies of a Blu Ray disk and then counting them as sales puts it to number one in a format that has not reached mass market yet. Hardly surprising is it. Thats nothing really to do with PS3 sales.
Posted by richto (895 comments )
Link Flag
I am sorry but when you use Enderle as a source...you lose creditability....
Posted by kbellve (30 comments )
Reply Link Flag
Hopes for PS3 Fans
Maybe he will not step down. Just like everything else he said and went back on his word.
Posted by abarnes112 (7 comments )
Link Flag
Please elaborate
Would you care to explain why Enderle has no credibility?
Posted by Christopher Hall (1205 comments )
Link Flag
You can't use Enderle. That's just silly.
The other commenters are right. Even if he's right, he's not a credible source.
Posted by solomonrex (112 comments )
Reply Link Flag
I doubt it was ps3 that force him to leave, sony planed for 2 to 3 market transition to ps3. They still selling ps2, last time I check they were out selling even the xbox 360.

Come next year you will HD-DVD discs disappearing, blue ray being onlyon left in the market.

PS3 will be in the market place fully with all it parts, Home, and eye 2 and are essential parts of sony plan for the ps 3, as well as games start to take advantage of this.

And the games in market will start to show the
real capabilities of the ps3.

And at the end of this all these analyse people, who swear talk sony down so to bring down it share so they can buy them up cheaply, and so when their share start rising they take their nice little profit.

In fact the ps3 been such a disaster how will it ever recover, you know it just happens ot be their share price is a five years.
Posted by knowles2 (1653 comments )
Reply Link Flag
How's the Trolling?
"Sony havnt even sold a million PS3s yet."

So, where do you get your info?

<a class="jive-link-external" href="http://en.wikipedia.org/wiki/Playstation_3#Sales" target="_newWindow">http://en.wikipedia.org/wiki/Playstation_3#Sales</a>
Posted by freemarket--2008 (5058 comments )
Reply Link Flag
All you have done...
...is proven that he is mostly right. The only territory where the PS3 has broken the million mark is North America. That isn't good.
Posted by SonicV4 (37 comments )
Link Flag
All you have done...
...is proven that he is mostly right. The only territory where the PS3 has broken the million mark is North America. That isn't good.
Posted by SonicV4 (37 comments )
Link Flag
Someone Has No Clue
This Enderle guy has no clue. As an "analyst", he should know better.

It's simply too early to say the PS3 was a flop. It is more expensive than the other consoles, but not too expensive, taking into account the things it can do. Millions of people shell out 300-400$ for an MP3 player. So there are surely millions who are willing to pay 600$ for a videogame console+HD video player. The only problem right now is the content. Once the must-have games come out, the PS3 sales will improve significantly. It wasn't that far from the XBox360 numbers.

The only danger is if the game developers, witnessing the disappointing PS3 sales so far, decide to develop for other platforms for their future projects. PS3 would lose exclusivities (it already started to happen), it would no longer be THE platform of choice to develop for and sales of the hardware would stagnate. This vicious circle is the biggest danger to the PS3.

Anyway, I'm confident one year from now, the numbers will make Enderle guy eat his words.
Posted by dysonl (151 comments )
Reply Link Flag
Christmas Belongs to the PS3
While Microsoft has Halo 3 (a legit hit) that appeals to the fraggers and twitch gamers Sony will be focusing on humanizing the PS3 experience.

First is the Home service. The service will be a haven for just about every advertiser on the planet allowing them to market products while opening the doors for interactive content and services like never before.

LittleBigPlanet, allowing users to make levels, share levels, and even giving them bragging rights for creating levels that get played over and over by thousands. It could very well lead to novice game designers a break in the industry.

Then there's SingStar. Mixing iTunes with YouTube and, once again, giving people the sense of accomplishment and community. I predict marketing tie-ins and even a partnership with American Idol.

The PS3 may've had a slow start but they're heading into territory that the competition is not and cannot compete with.
Posted by incredibilistic (92 comments )
Reply Link Flag
Big yawn...
Home service? Littlebigplanet? Singstar?

Listen, it's about games. Look at Nintendo. Do they have these big online environs? No. They have great games. Sony's got a powerhouse system with no good games. And it costs too much.

I already have a PC. In order for Sony to attract me at this price level they'd have to include software like photoshop, iMovie, Something with long term guts along with great games. I may be one in a million, but I absolutely hate online games. Sony (nor microsoft for that matter) doesn't care about people like me who want a great game we can get into at our own pace, whatever that pace might be.

Nintendo, on the other hand, is showing they care. Sony and Microsoft both are losing mindshare. Including mine.
Posted by mattumanu (599 comments )
Link Flag
little too early to declare PS3 as Christmas winner
They're heading into territory that will kill them, and I'm worried.

Why the heck would I want to spend $600 for a PS3 that does the same thing as my existing home entertainment system? Because it's cheaper? TOO LATE. I already have an entertainment system that can play blueray and DVD in HD quality on my flat screen TV.

Home Service sounds like yet another MMORPG with a touch of The Sims: Online.

As for LittleBigPlanet? I dunno about that. Nice concept there though. I gotta give them props for that. However, Microsoft has something called XNA Creator's Club where hobbyists and developers can create games that they can share and market for PC and XBOX 360, as opposed to making levels for just one game.

SingStar might show promise, although I'm somewhat mind boggled as what you are talking about regarding American Idol. Seriously. You gotta be kidding me.
Posted by mbjr (64 comments )
Link Flag
Enderle = No Credibility
Enderle is an old troll who only has negative things to say about
anything. He's usually off base and knows just enough buzzwords
to make people think he knows what he's talking about. Jeers to
Kanellos and CNet for giving this fool a megaphone.
Posted by kenohki (38 comments )
Reply Link Flag
In My Humble Opinion...
As a wife and mother of three gamers, I have come to the following conclusions:
Yes, the Wii is brilliant for it's innovative control systems. Nintendo has always had phenomenal playability. However, for people who are into the audio/visual experience of a life time, it does come up short. The kids love it, and the games tend to be longer than the other two, but - what can you say other than that. Oh, and it's cheaper, as it should be.
The Xbox, well, we owned 2 and they both broke down. They are not cheaper than the Playstation 3 in Canada, not at all, and never really, were even before the price breaks. The sign up costs for using the console online are ridiculous. I must laud them on getting out there first, but they took too many short cuts with quality. The games are great, if they play. Microsoft should have stuck with graphics for PCs: believe me, their red ring of death is bloody frustrating. They must have a huge financial backing to offer to replace the console each time it breaks down - we just got rid of ours, had enough.
What is the old addage? Measure twice, cut once? I know that is Sony's motto. So what if we had to wait a little while longer. They usually don't put out crap. We just bought our PS3 last week (I made my family wait for a price break after the financial losses we took with XBox360 - beware: they say that they will refund your money in the written warranties, but "They don't do that."). We always wanted the PS3 and now they are at an excellent price in Canada: only $399.00 and no extra sign up BS. My ex-husband didn't wait for the price breaks and he was wholly pleased for his money. As a family we've always been loyal to the Playstation Franchise. We fully support them, and are extrememly excited for all the new titles 2008 promises. I hope they gave the man a huge bonus.
Developers: please don't shy away from PS3 - you'll see, they'll make it afterall.
Jennifer Stolle
Surrey, BC
Posted by hoosterrooster (1 comment )
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