In an announcement that shouldn’t surprise regular GigaOM readers in the slightest (warning signs emerged as far back as last February, and reached crescendo pitch in November and December), Sony Computer Entertainment Inc. just announced that CEO Ken Kutaragi, the “father of the Playstation”, will leave […]

In an announcement that shouldn’t surprise regular GigaOM readers in the slightest (warning signs emerged as far back as last February, and reached crescendo pitch in November and December), Sony Computer Entertainment Inc. just announced that CEO Ken Kutaragi, the “father of the Playstation”, will leave his post in June and become an “honorary chairman of SCEI”.

By most appearances, his new title will be an “emeritus” position in the sense attributed to Rupert Murdoch, when he showed a Newscorp exec the door: “The ‘e’ means you’ve been given the elbow and the ‘meritus’ means that you bloody deserve it!” Unsurprisingly, most analysts attribute the departure to the Playstation 3’s poor performance against the Wii, and worst blow of all, as compared to the Xbox 360.

Not entirely deserved, however, for despite the numerous missteps in its development, pricing, and marketing, the PS3 ultimately failed because Kutaragi succeeded with the PS2 so well. Though seven years old now, the Playstation 2 is still selling better than the Playstation 3; with a 116 million+ installed base, a massive library, and a list price under $100, there’s little incentive for Playstation fans to spend $600 upgrading. (Especially when quality backward compatibility was in doubt.)

So there’s tragic irony in Kutaragi’s departure. Having transformed videogaming into a truly massive entertainment medium, he seems to have assumed that the market he did so much to create would follow him to the next level.

As IDC analyst Billy Pidgeon put it to the AP, “Sony didn’t notice that their audience was dwindling and didn’t increase the base by playing to a wider demographic, and instead it played the old-school game of playing to the 18- to 32-year-old male early adopter.” But in those seven years, the young men who had eagerly snatched up the PS2 were now having kids of their own, making them ripe targets for a console that could appeal to their whole family. So rises the Wii– and so goes Kutaragi-san.

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  1. “with a 116 million+ installed base, a massive library, and a list price under $100, there’s little incentive for Playstation fans to spend $600 upgrading.”

    cant believe they can make such a blunder. same with vista. why will anyone upgrade?

  2. Or, his departure may have to do with his decision to incorporate the Cell processor and a Blu-ray drive into the PS3. Had he decided to go another way, the PS3 would have been much cheaper (for both Sony and its customers), would have shipped sooner, and would have been easier to develop for. And, as shown by the Xbox 360, the performance would have been just as good.

  3. “My sentiments exactly”:

    “Howard Stringer, the Welsh-born chief executive of the Japanese company, heralded the PS3 as the key to his strategy for reviving Sony’s performance against its main rivals such as Microsoft and Apple.”

    Do I think the PS3 is the basis for even a successful product innovation, let alone a successful company transformation – NO!

  4. Martin Varsavsky Friday, April 27, 2007

    I think that the PS3 is an awesome piece of work and I am surprised that Sony was not more patient. Fon was not an instant hit, our growth only seriously picked up in the last 90 days a year after our launch. Technology is not like movies that if you don´t have a hit the first week you are dead.

  5. Sean Thompson Friday, April 27, 2007

    “Not entirely deserved, however, for despite the numerous missteps in its development, pricing, and marketing, the PS3 ultimately failed because Kutaragi succeeded with the PS2 so well.”

    By what logic do you deduce that the PS3 has failed? We’re only 6 months into a 5-6 year cycle so far too early to judge. It’s an awesome bit of equipment in my point of view. Yes Sony has made plenty of mistakes on the way to getting it out but technically it’s impressive. Would you judge Microsoft to be a failure as they’ve just released they made a $315 million loss for the quarter to March 31st in their E&D department? I don’t see the Wii as being in direct competition with the 360 or PS3 either, everyone I know has it as a second console.

  6. I think that the truth lies somewhere in between Martin and Mark’s observations.

    The console business exists on hype and PR to some extent and Sony have been out-boxed by Nintendo on that score. By a knock-out.

    In an age in which content distribution is moving online, falling bandwidth prices, faster connectivity, triple-play, Sony were guilty of not skating where the puck’s going when they placed their bet on blu-ray.

    Fon is benefiting from Metcalfe’s Law, as many great and scalable companies do. Some recent deals have also helped fuel growth.

    Sony need to do some clever marketing. They should encourage trade-ins, perhaps bring out a stripped down PS3 for Christmas, unearth another generation-defining game franchise.

    And they need plenty of new blood. The old lot went stale years ago.

  7. Paul McMahon Friday, April 27, 2007

    I think the media have been overly critical of Sony and the PS3 since day one. Although this announcement was widely expected i dont see it as doom and gloom for the PS3.

    People seem to forget that the Xbox 360 struggled during its launch and was consistently being outsold by the PS2 in every market worldwide. Now were seeing a shift in power as the 360 finally is producing high quality games with a massive PR and marketing strategy (The Gears Of War ad campaign was everywhere). The PS3 is only over a month old in europe and i I think the best is yet to come from Sony and i think the PS3 will take back its crown as the best selling console.

  8. “the PS3 ultimately failed”

    How can you possibly say the PS3 has failed when it hasn’t been out long compared with the other two, and, as everyone knows, the price will fall sooner or later and then the PS3 will start selling in big numbers.

  9. The reason the PS3 is considered a failure is simply because its too late to the game.

    this generation of consoles was always going to be slow because your not just buying a console you need the tv to make it worth you while. The xbox came out what seems an age ago and its now got a solid base and developers love it. Sonys developed a great piece of technology but they have simply over done themselves. they have released a product the development world isnt ready for.

    Saying the PS3 will come down to a reasonable price in the future is pointless because by then people will have bought a 360 or wii and buy the time developers are getting the benefits of the ps3’s hardware MS will simply release a new console.

  10. The numbers speak for themselves and the ps3 has very few exclusive games. I can see the 360 and wii pushing out the PS3 unless a killer game title emerges. Check out some numbers below.


  11. The PS3 is technically ahead of the others, I don’t know if it’s ahead enough of the 360 to justify people buying both, but there are many PS2 owners waiting for the PS3 price to drop. Also there are people who will buy it because of Blue-Ray (I don’t want to start a B-R v HD war here). You’re right about the need for the right TV (HD) though, and Sony have obviously thought about that too. It’s far too premature to dismiss the PS3 as a failure.

  12. “But in those seven years, the young men who had eagerly snatched up the PS2 were now having kids of their own, making them ripe targets for a console that could appeal to their whole family. “

    This is exactly my situation!

  13. If Sony want to know why sales dropped it is simple: They relied for to heavily on the opinion that people would see “Sony” and come running. This obviously didn’t happen, the price was too high and it got delayed so much it wasn’t even funny and frankly in comparison to the Wii it wasn’t exactly a leap in new inovations. Power wise? You could build a much better pc for the same sort of price.

    I am really sad to say this because I still love my PS2 (even if only use it as a DVD player these days) and I was excited by the PS3 but I just couldn’t find a real justification to blow half of my monthly pay check to have the console right away which has a very limited selection of games.

    Sony, if you release a PS4 make no assumptions on sales or having a core market, it’s been said a compony can learn from it’s mistakes that have been made, Sony, go back to school.

  14. Chubster2010 Friday, April 27, 2007

    I think the PS3 is a bit of a paradox. It is an amazing bit of kit, but in many ways has been released too early. The proliferation of HDTV’s isn’t yet at a point where many people feel they can justify purchasing a PS3. Give it a few more years then things maybe different, but at what cost to Sony? (the battle may already be over!).

    So, on one hand its’ a bit too ambitious, but on the other hand it has it’s feet firmly stuck in the past. Criticise the Wii’s graphics all you like, Nintendo’s effort is clearly more ambitious in pushing the boundaries of what videogames can achieve and to whom they can appeal. The PS3 lauch line up seems to consist of rehashed 360 and pc games, or simply better looking versions of fairly stale genres.

    If more of the same is what you’re looking for, then the PS3 (or 360) are fantastic consoles. But as games like Sony’s own God of War 2 have shown, the last gen was more than capable of churning out some stunning visuals, and this couple with the remote make the Wii, for me a least, a most exciting console of the three (for now…).

  15. ps3 rocks

  16. gamecube was a failure cos it arrived late. Ps3 the same.

    All the better for Nintendo, well done for doing it diffferent

  17. People need to take into account when the first playstaion came out its price was exspensive at that time.
    600 pounds really is not that much in todays money considering people go and pay 400 pounds for a single gfx card and upto 200 pounds for ram and thats without motherboards and all the other stuff you buy.
    I bought a xbox 360 when it was launched played for a few days dident think it was that great put it back in its box and sold it on ebay.
    The thing i am looking forward to if sony does not change its mind is making keyboard and mouse support for fps games and rts(think new unreal is going to be the first game to have this function) that in my opinion is a great step forward most people have game stations now so the use of keyboard and mouse for gaming on a console is good in my opinion.

    Sony have stated that there machine is not just a gaming machine its an central hub for the home and dont see keyboard and mouse as such a big issue anymore.

    Microsoft on the otherhand wont let there developers make games with mouse keyboard support as they dont want people thinking of the xbox as a cheap gaming pc which is what it is really.

  18. Bottom line, there are 2 factors for console gaming – price and quality of games. PS3 is failing in both so far. Nintendo is excelling in both. Microsoft is the middle ground but getting better.

  19. The reason that the PS3 is failing is down to three things.

    1. Price is too high.

    2. Lack of exclusive games. (Non-exclusive games are too easy to just write for the 360 then port; making them indistinguishable.

    3. The general image of Sony. They were voted the most hated company on gamefaqs by greater than 50%. The Rookits, Lik-Sang and the like have not helped; as well as ‘fanboys’ with more presistance and worse arguments than fanboys any of the other consoles. And they still con us to this day; saying yesterday that they will be more open to homebrew, yet the GPU is harder to get into than fort knox.

  20. The nintendo is a good innovation reagrding the controller but come on you look like a bloody moron swinging it about its a good machine for when you have been out with your mates come home drunk and have a laugh..

  21. Shakir Razak Friday, April 27, 2007

    This is the most shoddiest piece of “journalism”/blogging I’ve ever read on Giga om.
    It looks like it’s written by a fanboy with little grasp of much, least history and experience, trying to appear objective in reporting a management re-shuffle.

    The Playstation 3 has NOT failed.
    It is ready for networked distribution -the most ready.
    We are still in the early-adopter stage.
    Sony are the elast dogmatic about their platform v. ms/nintendo.
    A 100million+ PS2 owners will want to continue having their library when they move on.
    All those flat screen owners will want something that’s capable out of the box for the best -only one console does that.

    There is so much back-ground material (technical, strategic/managerial and historical) that the writer of this post (and many commentators) simply do not seem appreciate.

    This does not preclude the other 2 mnufacturers also having good strategies, but among the mass non-nerd, non-fanboy population, Sony probably have the most potentially successful one.

    They haven’t substantially “messed-up” anywhere except PR (and killer-apps) -but good products are more likely to eventually matter, then spin.

    Yours kindly,

    Shakir Razak

  22. I own a 360 and think it’s great.

    However, you only have to look at the number of consoles sold in the last generation compared to the number sold this generation to see there is a considerable games playing public who haven’t yet made up thier mind or are awaiting for more reasonable pricing beforing joining the party.

    So far to early to start calling any console a failure.

  23. Two words for you:

    Sega Dreamcast.

    The dreamcast was technically a superior piece compared to the PS2 (I still have RE: Code Veronica for the DC, and it looks much better than on the PS2) but PS2 murdered it for the same reasons that 360 and the Wii are murdering the PS3 right now: wider array of games, better appeal, better… well, at this point, everything.

    It’s hard to say whether the same paradigm that finally drove Sega out of the console business will apply to Sony, because Sega had to license others to manufacture their consoles whereas Sony can produce the darn things themselves, but hype drives the gaming world ’round: if gamers don’t buy a system, companies won’t make games for a system, gamers don’t buy a system with no games, so companies won’t make games for a system…

  24. STOP! THINK! The Wii is successful because it does less very well. Games + exercise. Just pause to think about that. How often do we exercise these days? How many PS2 & 360 gamers exercise their cardiovascular system whilst game playing? Think of the development of hand-eye co-ordination amongst children. The elderly working out their bodies & minds.

    360 is not a success because it is trying to be all things to all men. i.e it is trying to be a game machine, a dvd player, a web access & download system via expensive subscription and a media centre. It has cost ms Billions to develope & returned only a few hundred million.

    PS3 is also trying to be all things to all men & has therefor become a cropper like 360 with the added error of not sending developers early access to the platform to design games for it. Developers therefor concentrated on the platforms available.

    All these platforms will find it very difficult to establish themselves as multimedia hubs for the home because of one other product & how it does this extremely well and simply. AppleTV

  25. i still love my zx spectrum!

  26. “600 pounds really is not that much in todays money considering people go and pay 400 pounds for a single gfx card and upto 200 pounds for ram and thats without motherboards and all the other stuff you buy.”

    I would say you were correct , if you thought the mass market didnt mind forking out that sort of cash and were happy to buy grfx cards for that sort of price.

    As I understood it, the only people buying grafx cards at the sort of price were gamers.

    I reckon mass market is composed of folk who enjoy a bit of gaming but primarlily use the pc for managing their photo’s, downloading music and browing the internet. Not activities that require a leading edge grafx card or the fastest pc.

    After all, folk are still using windows 98 out there!

  27. quote from fo.unta.in “same with vista. why will anyone upgrade?”

    The difference is most people will eventually have to upgrade to Vista. Eventually, all the application software will only run on Vista, thus essentially “forcing” people to upgrade.

    This can already be seen with the Halo series. I believe it will only run on Vista.

    Sony, on the other hand, Are not really taking advantage of this. If there were more killer games (e.g. MGS4 or FFXIII), the console would do much better. As it is, the only game that interests me for PS3 is Oblivion… and I have that on PC already.

    I just hope for Sony’s sake that the killer exclusives don’t arrive too late.

  28. As I understood it, the only people buying grafx cards at the sort of price were gamers.

    Are we not talking about a gaming machine regarding the ps3 are they not gamers?.

    you are correct people are still using win 98 god forbid some of my customers are using windows 95 but if it works for them in a office enviroment people wont change. Gamers though even people who buy low-mid range are still spending an average of 400 pound to upgrade so my point stil stands 600 pound is not that exspensive.

    And the good thing about gaming on a pc is you can update all the time every year if you wanted to once a console hits its peak thats it.A pc will keep going when dx10 kicks off properly and we get our new shiny gfx cards that are hd/phsyx cards the xbox 360 and ps3 will be no better.

    gaming no matter what platform you play it on is big buisness and its also personal preference i have not used a console properly for years i prefer gaming on my pc.
    i can do what i want with it gaming web anything its a better rounded platform for me personaly.

    last thing: people need to take note most of the general public dont care about specs and dont know about all the crap people talk about on the web they have had sony/Nintendo/Xbox in the past and will decide on merit to go with sony or nintendo or wii the majority are fickle like that and kids want the best sony is seen as the best so it will shift in the long run.

  29. 600 pounds is for the console alone. You can buy a pc with good graphics cards, motherboard and everything, including a monitor, for about a 900 quid.
    You will need to buy a big hd screen to get the best out of a PS3, and those cost about 700 quid+ for good quality, so you pay
    1300 plus+
    It makes more sense to get a pc eg. for surfing the internet etc, or to get a cheaper console for gaming.
    Sony have judged the market wrong this time, and need to have a major rethink, because they can make great products like the PS2.

  30. The last paragraph rings true for me. I was an early-adopter of the PS2, now I have 2 kids and I bought a Wii so that my young kids and even, shock horror, my wife can use it. The PS3 is also too big/bulky.

  31. I have to agree with most of the comments here; The PS3 cannot be called a failure yet, hell none of the consoles can be, they have hardly lifed out half their life span yet and people are calling them failures, christ!

    As for me, well im a uni student with a PS2 and a nice PC that runs what i want it to games wise (WoW, Oblivion, Fable, SpellCraft etc). My PS2 is still used a fiar bit, normally when i want something different to play. However, looking at all the consoles at the moment, there is not one that really captures me. Out of al of them i would have to go for the Wii becuase it is so different, but then again i wouldnt class it as like the 360 or PS3 either.

    In the end itll come down to what games are out in the next 24 months. Personally im hoping that MGS4 and FXIII are not a load of re-gurgetated drivel, because otherwise theres no way im buying a PS3

  32. Nich Starling Saturday, April 28, 2007

    The problem was Sony’s obsession with trying to make people jump forward in two technological steps when they were/are not prepared to do so.

    In trying to get us to but the PS3, they have to convince us that the PS2 is no longer viable and we need to “move forward”. This would be fine were it not for the fact that many people have already taken that step by going for the XBox 360.

    So then, realising they have to get ahead of Xbox, they go for a second leap forward by going for blu-ray. The problem here is though that they have to convince us not only to move forward in gaming systems but also to accept that there is a need to replace our DVD players, which at the moment, there is no great rush to do. Yes, in 18 months time people might want HD, but at the moment, most people do not even own HD ready TV’s, so what is the point in an HD DVD ?

    So Sony have, as we say in the UK, made a balls up by pricing the PS3 so high as well. I might have been a PS3 buyer had I not bought an Xbox in late 2005 and my Wii in late 2006. Why do I need a PS3 ?

  33. Nich -Sony are playing from exactly the same game-book as they did with the ps2, with added VHS-lessons.

    Gamers and analysts have repeatedly slagged off their marketing,spec.’s, etc., and every time/generation they’ve been proven wrong => The only difference this time is expectation and a few hiccups -no doubt in part due to playing at other people’s timetables (xbox-death, and blu-ray components).

    Kind regards,

    Shakir Razak

  34. In my opinion the PS3 is failing mainly failing due to cost and trust.

    I think the fact that it arrived a lot later than the xbox360 is pretty irrellivent and lets face it, if the ps2 came after the xbox it would still have postioned where it is now.

    The ps3 is hugely more expensive than xbox360, sony again have gone their own way with blue ray rather than hd (remember betamax, minidisk, atrac etc) and with the recent customer betrayal of the root-kit fiasco and the recent publicised patents allowing them to restrict a piece of software to 1 console, meaning if your console breaks so does all your games its no wonder why a lot of people are heading down the xbox360 route.

    Its a shame when the pure brilliance of Sony is marred by their fanatical content ownership approach which lets face it only really affects their customer who do buy their products.

    I have always been a huge Sony fan and never even felt ripped off by paying premiums for having their technology early on, I think the PS3 is awsome, but unfortunately cannot bring myself to trust sony enough to actually go and buy their product. If your considering a PS3 just google ‘Sony rootkit’ and decide if you would trust them with your data?

  35. The PlayStation 3 (don’t forget the uppercase “S” James!) will be fine. It’s way too early to gauge its success or failure. People are forgetting that the system still has many exclusives coming out down the line (most notably Final Fantasy and Metal Gear Solid).

    Another reason KK was “booted upstairs” was because of the wacky stuff he said. This is the man that said people will work harder so they can afford a PS3, after all. A lot of the negative image Sony picked up over the last year started with him.

    I’m sure people will remember Ken as a visionary that brought gaming to the masses. A few years (okay, maybe ten) will be enough to forgive and forget. It’s kind of like how people forgave Gunpei Yokoi for the Virtual Boy and remember all the other innovative things he did for Nintendo.

  36. Shakir’s post is exactly the sort of reason I’m not going to buy a PS3 for a while – Sony fanatics, who label everyone who doesn’t agreen with them a ‘fanboy’ and come up with irrelavant or incorrect arguments. (Yeah gudging by sales.. Sony really have the best strategy all sown up; And what does ‘distrubuted network ready’ mean to gaming?). They’re just alienate anyone who doesn’t agree with their views and IMHO, they’re half the reason why the PS3 is don’t so bad.

    Once the PS3 just gets some killer exclusives and it’s fandom stops being jerks, I’ll be in line.

  37. I think some people are forgetting something here… In its first few days of the UK launch the PS3 sold more consoles than both the wii and the xbox 360. The numbers were as follows:

    PS3- 165,000 (75% of its launch stock)

    Wii- 105,000, AND that was at christmas time.

    Xbox360- 70,000

  38. Nich Starling Sunday, April 29, 2007

    David, you are forgettint that nintendo and Xbox xould ahve sold out three or four times what they sold at laucnh, they simply did not have the stocks. You still cannot but a Wii off the shelf in any shop in Norwich where I live.

    The PS3 may have outsolf the wii at launch, but what about last weekend ? How come Wii is outselling PS3 in japan by 2-1 ?

  39. Every race has a start, a middle and an end. One should not suggest that by being behind in the start of the race one will not be ahead by its completion.

    The PS3 – when made slightly cheaper (say 30%) and with compatibility issues out of the way – they will fix it – if its costing them, and when blue ray hits video shops – we will see the PS3 enter its own.

    I think it will still be the winner. Time will tell

  40. The PS3 can be considered a failure because it has failed to accomplish the goals it was designed to accomplish, such as moving more off the shelves than the 360 or Wii and securing blu-ray as the fomat of choice. And while yes, blu-ray is currently out performing HD-DVD, its not doing well enough to counter the fact that Nintendo is creaming it. Im in Australia and if I had to choose between buying a Wii or a PS3, theres easily 700 or so good reasons why I would get a Wii over a PS3, and most all of them come straight from my wallet

  41. Here in the uk it’s simply failing because the price is more than most peoples monthly mortgage payments, ps1 and ps2 done so well because they hit the disposable income markets a generation who had grown up with video games and were now adults with jobs and the money to pay for them. But the ps3 is simply a price hike too high, unless your a “serious” gamer most people just arn’t bothered. Some places were selling the ps3 on it’s release at over £500!

  42. Its not rocket science, its just plain fact that most people are note gonne spend £400 on a console. Seriously, what were they thinking????

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