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PlayStation developer quits Sony as sales slow

Times Staff Writer

The engineer known as the “Father of the PlayStation” said Thursday that he would end his three-decade career at Sony Corp. in June in the wake of faltering sales of the latest version of what was once the world’s bestselling video game system.

Sony said Ken Kutaragi was leaving voluntarily to make way for a new generation of management at the Tokyo-based consumer electronics giant. His departure comes at a time when the PlayStation 3, which Sony Chief Executive Howard Stringer described as a cornerstone for the company’s growth, has been outflanked by rival game consoles by Nintendo Co. and Microsoft Corp.

“He was the lifeline for Sony for a period of time, as Sony took on the major task of restructuring electronics,” said John G. Taylor of Arcadia Investment Corp., an institutional research firm in Portland, Ore. “But the magic stopped there.”

In December, Kutaragi was removed from day-to-day oversight of the game division, Sony Computer Entertainment Inc., and took the role of chairman and chief executive. His protege, Kazuo Hirai, the former head of U.S. game operations, became president of the division. Hirai will be promoted to chief executive on June 19.

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“I actually think it’s really sad,” Michael Pachter, an analyst with Wedbush Morgan Securities, said of Kutaragi’s departure. “He is a visionary, a once-in-a-lifetime person. He’s the Sony analogy to Steve Jobs.”

Kutaragi is one of the most revered figures in electronic entertainment. An engineer by training, Kutaragi is known to be passionate, almost childlike, in his enthusiasm. In the early 1990s, when game consoles were dismissed as toys and Nintendo dominated the market with a system that played such titles as “Super Mario World,” Kutaragi built a box that attracted an adult consumer. The risky gambit helped transform the toy business into a mass market that today brings in about $30 billion worldwide.

“Sony turned the tables completely on Nintendo,” Taylor said. “I think it was part of Kutaragi’s legacy that the core of the business, the biggest and most dynamic part of the business, shifted to those companies that were addressing males between 18 to 35.”

The original PlayStation, introduced in December 1994, quickly surpassed Nintendo’s bestselling game console, selling 100 million worldwide. Sony cemented its dominance with the 2000 introduction of the PlayStation 2, which commanded a 70% market share, with global sales of 110 million boxes.

PlayStation emerged as a reliable cash cow for Sony, contributing at least 60% of the company’s revenue in fiscal 2002, 2003 and 2004 and 58% of sales in 2005. Its market clout emboldened Sony to engineer a new system that extended beyond video games.

The PlayStation 3 contains a high-definition disc player, which was designed to establish Sony’s Blu-ray format as the standard for the next generation of DVDs.

The goal was to spark sales of the HD movie discs sold by Sony’s movie studio and the Bravia televisions made by its consumer electronics group.

But that decision inflated the cost of the PlayStation 3. At $599, it is the priciest system around -- even though Sony loses money on every console it sells. Component shortages caused Sony to postpone the launch date, halve shipments to the U.S. and Japan and postpone the European launch. The PlayStation 3 had an anemic debut last fall.

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In the first five months, Sony sold 1.2 million PlayStation 3s in the U.S. That’s 43% of the sales of PS2 over a similar period. By comparison, Nintendo sold nearly twice as many of its Wii game consoles, at a price of $250, in the U.S. -- 2.1 million -- and 5.84 million worldwide.

Most recent sales figures show Microsoft’s rival Xbox 360, costing as much as $400, is consistently outselling PlayStation 3.

“A lot of Sony’s problems were self-inflicted,” Taylor said. “They stem from a decision-making process that took too much time, from design decisions that ended up resulting in a very expensive box and what I think is a lack of full awareness of the competitive threat.”

dawn.chmielewski@latimes.com

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(BEGIN TEXT OF INFOBOX)

Pioneer

Name: Ken Kutaragi

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Age: 56

Born: Aug. 2, 1950, in Tokyo

Career: Joined Sony in 1975; developed PlayStation, 1989-1994; CEO, Sony Computer Entertainment, 2001-2007

Education: Bachelor of science, University of Electro-Communications, Tokyo, 1975

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Source: Times research


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