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his week Sony Computer Entertainment Managing Director Michael Ephraim heads to London for a Sony PS3 summit. Top of the agenda will the March 2007 launch of the PS3 into Australia and Europe as well as discussions on the future of the Sony games console which some are now saying will not go past the PS3.

Late last week SCEA announced that it was reassigning certain top level executives, in particular moving former head honcho Kaz Hirai to president of SCEI (Japan) and Krazy Ken Kutaragi taking on the role of group chairman.
During an interview with the Financial Times in London Nomura analyst Yuta said that the PS3 may be Sony’s last console, since Hirai has traditionally been focused on the software side of business. During the interview he said, “The appointment of Hirai could be the start of a shift from hardware to software.”  He added, “I cannot now imagine a PlayStation 4.”
Other analysts claim that the statement seems to be a terribly early assumption, and indeed Wedbush Morgan analyst Michael Pachter disagrees with Sakurai.  “I think Kutaragi’s promotion signals absolutely nothing about Sony’s plans for a PlayStation 4.  It is embarassing that an analyst could reach that conclusion so soon after launch” he said.
The shakeup at the Sony division that is responsible for Sony games consoles and software is seen in part as an indictment on the company’s poor planning for the PS3 launch, in particular with Kutaragi no longer being involved in the daily PlayStation business (even though he technically received a promotion).  As you probably know, the launch was plagued with several key titles slipping past launch, significantly fewer units available than anticipated, a delay into March 2007 in Australia, several technical glitches, and online functionality that was somewhat underwhelming.

The surprise move, though technically a promotion, removes Mr Kutaragi from the day-to-day running of the games division.
With the PlayStation3 only just past its difficult launches in Japan and the US, Sony is desperate to ensure that its complicated machine triumphs in the holiday shopping season. The company described the changes as “strengthening” its management line-up.
In the longer-term, the PS3 faces stiff competition from Microsoft and Nintendo and a European and Australian launch next March for which some analysts fear Sony is not fully prepared for.
Replacing Mr Kutaragi as Sony Computer Entertainment’s global president and chief operating officer will be Kazuo Hirai, a veteran of SCE’s US division, who prematurely claimed four years ago that the era of console wars was over.
Investors know Mr Hirai as a slicker, more confident presenter than Mr Kutaragi. He is also understood to have stronger working relationships with American, European and Japanese games makers.
Analysts said that Mr Hirai’s promotion to a global role at SCE could mark a critical shift in management thinking, with Sony changing its emphasis so that the current generation of games console will be its last as a hardware manufacturer.
“The appointment of Hirai could be the start of a shift from hardware to software,” said Yuta Sakurai, an analyst at Nomura. “I cannot now imagine a PlayStation4.”
Mr Sakurai said that Mr Hirai’s new global portfolio puts a predominantly software-focused manager in charge of the company, adding that SCE’s future would be shaped by Mr Hirai’s relationship with Phil Harrison, the president of SCE’s worldwide studios.
Analysts argue that while Mr Kutaragi, a brilliant engineer, was the right man to run SCE as a hardware powerhouse, Sony may now see better opportunities as a pure maker of games.
Sony has taken a big financial risk investing in the PS3, and according to some estimates the company will still be making losses on the console for some years. Recouping that loss will depend on Sony’s own ability to make popular games, and to nurture close relationships with third-party studios.
Other analysts played down the significance of the reshuffle, arguing that Mr Kutaragi would retain tight control of the division he made so powerful within Sony.
Mr Hirai’s role, as KBC analyst Hiroshi Kamide sees it, will be to use his superior communications skills to smooth-over SCE’s relationships with third-party games companies – relationships badly strained by the repeated delays of the PS3 launch, and the limited number of machines available even now.

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