The management reshuffle at Sony Corp. could draw the PlayStation video games business even closer to the heart of its digital distribution strategy despite a diminished role for games guru Ken Kutaragi, analysts and industry watchers say.
Kutaragi, known as the "father" of the PlayStation, lost his seat on the Sony board and title of executive deputy president in changes this week that saw U.S. Sony head Sir Howard Stringer become CEO of the entire company.
Kutaragi, once regarded as certain to succeed current CEO Nobuyuki Idei, remains chief executive of Sony Computer Entertainment.
Industry players at a Game Developers Conference in San Francisco were stunned by the turn of events as Kutaragi has been seen as in control of Sony's destiny, with the PlayStation its only consistent profit earner in recent years.
To say Sony relies on gaming is an understatement. In the last three business years the game unit has been its biggest driver of operating income and one of its top revenue sources, aside from the struggling electronics segment.
The next-generation PlayStation 3 (PS3), expected to be released in 2006, is being seen as a home entertainment hub.
Some investors worry about lack of representation on the board of the computer entertainment unit at such a time.
But most analysts said it would be "business as usual" and might even help Sony's games business.
"When you consider that Mr. Kutaragi can now concentrate his manpower just on games, it's positive for the game business," said Yuta Sakurai, a senior analyst for Nomura Securities.
One analyst, who asked not to be named, said if anything the PlayStation hardware could become more central to Sony because of the company's digital distribution strategy for media, one that needed a central piece of hardware like PlayStation.
Stringer, with extensive experience in the entertainment business, could help bring about a "convergence" of hardware and entertainment that eluded so many tech companies in the 1990s.
Kutaragi loses oversight of Sony's semiconductor business at a time when it is preparing a new super chip, called Cell, for the PlayStation 3 and a range of other electronics gadgets.
"He's going to have to keep a balance with the rest of Sony going forward. Since he's lost responsibility for semiconductors he won't be able to sacrifice the rest of Sony for PlayStation in terms of both money and people," said Deutsche Securities analyst Takashi Oya.
But others doubt he will lose practical control over Cell since it is so intimately connected with PlayStation strategy.
Kutaragi is seen to have lost out to Ryoji Chubachi for the No.2 post at Sony in part due to his strong-willed unflinching style of doing business and reputation as a maverick.
"I cannot compare them, but Mr. Chubachi is a good listener ... He is a man who listens to various people's opinions carefully and makes the right decision at the right time," outgoing CEO Idei told Monday's news conference at which the changes were announced.
But those very qualities are likely to help him as he prepares for a tough battle in the games business next year.
Sony holds a commanding share in the current generation of consoles, but will have to battle anew in 2006 with Microsoft Corp. and Nintendo Co. Ltd. as all three prepare next-generation consoles.
Microsoft is expected to release a new Xbox this year. Nintendo's plans are uncertain.
Most ruled out the possibility of Kutaragi leaving Sony, saying it would be out of character for a top Japanese executive and also that there was a lack of suitable options for him elsewhere in the industry.
Some analysts believe Kutaragi could still be a potential successor to Stringer or Chubachi.
"The door is still probably open to (Kutaragi)," said Hiroshi Kamide, Tokyo-based analyst with KBC Securities. "I don't think he wants to leave. As long as the PlayStation is the de facto standard in the industry, he's got a home."
