A weekend Wall Street Journal article claims Ken Kutaragi -- the father of the PlayStation -- went over budget on the PS3 without informing Sony knighted CEO Sir Howard Stringer until it was too late, forcing the company to reduce the launch price of the 20GB PS3 in Japan by 20%. The Journal examines Stringer's controversial and tricky two year run as global CEO while balancing the differing Western and Japanese business cultures and calls Kutaragi a rogue executive "notorious" for being at odds with Sony corp and its various divisions. But it's not just Sony management at odds with Kutaragi. The father of "stupid things said by executives" has been offending gamers for the past year, i.e. you must be affluent (like fine-wine) or work two jobs to buy a PS3.
Be sure to click over to Information Arbitrage for a full analysis of the interview including an in-depth look at the bind Stringer is in ("one of the hardest management jobs on the planet").
[via Next-Gen]
(Page 1) Reader Comments
Reply
Reply
OMFG they are teh biased!!! WTF does the Wall Street Journal know about business anyway?!!
Reply
Reply
Tell me, why were they _forced_ to lower the cost of the 20gig version if it was over budget? If anything, to me, that would mean it stays at the MSRP, rather than launching it 20% cheaper and swallowing up even larger costs.
Reply
Manufacturers typically price their products at a particular percentage markup (or on Sony's case, markdown) of manufacturing cost when not using more advanced activity based costing methods (aka target costing). Sony was only willing to take a certain level of loss per each unit sold. When a product goes overbudget, they either have to raise the price to cover the same loss-margin or take a bigger loss to hit the targeted market cost. Remember, the PS3 was originally suppoed to only cost $425 in the USA, but now we have a $500/$600 option. Since Sony can't effectively keep the unit at planned pricing levels, they have to raise the price and hand-select which market gets the original target cost. In this case, Japan.
Reply
From the article, it seems like Kutaragi went over budget, and his solution to the problem he created was to sell the system cheaper so that they could start turning profits on games more quickly.
Kutaragi, in yet another moment of brilliance, forced a loss on Sony and left them in a position where taking the loss all at once instead of spread out was the better option.
It's the epitome of the undercutting manager - the guy who tells all of his employees to take the afternoon off the week before a huge project is due, then tries to force you to hire more people to make up for the crisis he created.
Is Kutaragi the Japanese Michael Scott? All signs point to "yes".
Reply
Reply
Reply
Ken Kuturugi accepted the job from Nintendo to design the sound chip for the SNES without his bosses permission. The only thing that kept him in his job was the recruiter for him thought Ken was a genuis and stuck up for him. The sound chip shipped and Nintendo wanted a CD-ROM.
Within Sony, there was heavy resistance and an attitude that gaming was a toy and Sony was not, in fact, a toy company. He barely got permission to start work on the CD-ROM.
During the CES where the Nintendo Playstation was supposed to debut, Nintendo revealed they were working with Philips behind Sony's back and announced their partnership, doing a huge taboo in Japanese culture. Betraying a Japanese company for a Western one. It was only after this announcement that Ken Kuturugi finally got full Sony support.
To think, if Nintendo hadn't betrayed Sony, we would still be living in an era where gaming was considered a toy and Krazy Ken would be forced making DRMs for Sony Walkmans.
Reply
Games are still considered toys, only now more than ever are people convincing themselves that something they play with isn't a toy. Or maybe Kutaragi only said that because he himself never developed such software for it. :P
Reply
We'd also be living in an era where Sony stock is still worth $140 a share. Sony shareholders are saying they'd rather video games still be a toy because they lost nearly 2/3 of their investment because Sony wanted to target video games at high-end PC gamers. Kutaragi hasn't been good for Sony. He did the same thing with the PS2. Grossly overbudget. Which was a major impetus as to why Sony's shares came crashing down from highs of $142 just before the PS2 launch when word came out just how much the PS2 set Sony back. They still haven't recovered.
Reply
Playstation changed videogames from a niche thing to mainstream entertainment. Yes, he has said some interesting things, some far-fetched things....but he is still the creator of PLAYSTATION. The PS3 is going to as Reggie puts it...."start kicking ass and taking names"
I do not care what Ken says...as long as he keeps the future of the Playstation brand bright.
Nintendo pulled the rug out from under him at the last minute when he was working on the CD drive "Playstation" add-on for the SNES. Remember that one boys and girls? Instead of saying oh well, he convinced the Sony brass to let him complete the project w/o Nin. backing and release it as a competitor. Well, we all know how that turned out, don't we.
So, lay the frack off of the "Father of all things Playstation" and go play with your over priced, underpowered, and soon to be obsolete....WiiCube.
Reply
Don't fall into this classic trap. Sony is just as much at fault as Kutaragi.
Reply
I don't see what sexual orientation has to do with this.
Reply
Its funny, but in most article somewhat critical of PS3, you find the same comment.
Anyway, it does seem like Ken was an asset to the gaming world to begin with but sometime along the way he became a monster, contemptous of what gamers want, of whats good for his company. There are some photographs where his face reveals him as what he has beocme - Smug, arrogant, self-obsessed pr**k. He is probably responsible for the biggest problems in PS3 - the addition of BR and Cell, and inadequate attention to software. Thank god they kicked him upstairs.
Reply
Reply
Golly Gee, we would? Because until the PS3, the largest money losers within the Sony Empire has been the decline of the Walkman brand (their inability to change practically opened the door for iPod), the decline of their TV lines as the standard in televisions (something Bravia is only recently making up for), the laptop battery incident, the decline of Viao as a popular PC and notebook brand, the decline of Sony appliances all together, the decline of Sony Musics marketshares and inability to change to rapidly adjusting market trends, the decline of Sony Pictures in the rapidly declining motion picture business, and last, but not least, the inability to innovate the way they have in the past.
Sony has been mismanaged long before the PS2 (and, incidently, it turned profitable within it's second year) and that was one of the biggest challenges facing Howard Stringer. The fact that Sony was pretty much a whole lot of smaller factions working independantly with no regards to what others are working on and likewise, lots of infighting and competition.
Playstation accounts for less than 10% of Sony.
Reply
Personally, I think Sony should change their spokespeople. Namely, go from Ken Kutaragi to Katsuragi. Misato, that is.
Thanks, I'll be here all week.
Reply
If it were just 10% (of who knows what), Sony wouldn't even be putting the Playstation division as a separate entry on their financial statements. FASB rules state that any division that has more than 10% (and in the business world, this means around 15% because various assets, revenues and profit/loss numbers can be reclassified easily) of assets, profit/loss or revenue needs a separate breakdown. If it were even close to 10%, the Playstation division would be lumped under electronics. Financial statements would look better that way.
How about other stuff? Inventory buildup? 70% Playstation stuff (PSP and PS3). R&D costs? 60-80% Playstation (depending on if you argue that all BluRay costs should be PS3 related since this is where most of the BluRay stuff goes). Loss? 100% of all individual loss.
Yes, Sony was always mismanaged. However, they were only mismanaged to a point to limit income. Then along came Playstation. This golden goose got handed to them and gave Sony its first properly run product. Then along came the Playstation 2, which pushed Sony's mismanagement to new levels of stupidity. Sony pioneered the idea of loss-leading in a console market. Sony shareholders, elated that Sony finally had something worth investing in, expected the PS2 to follow the same formula as the PS1. Efficient, cheap, profitable.
The Sony drops its biggest bomb ever - we're going to sell each unit at a huge loss ... after we've spent large chunks of cash developing it. Shareholders didn't like that. This is why shortly after the PS2 launched the shares plummteted. Not because of weakening movies or consumer electronics, but because the PS2, this "10%" business, just ate out a much larger part of the company's expected return. The goose is no longer dropping golden eggs but it is still firmly glued to Sony's hands. Thankfully, they just now unstuck that thing (Kutaragi being removed from his position), but only after it dropped another stinker (PS3).
Timing is an important part of stock analysis. Had the prices started falling prior to the PS2, then we'd have a different story.
Reply
Reply
Looking at the stocks from that era. We see the stock price take an immediate rise a few months before the PS2 was released. The rise in price definately did not look sustainable. In the one year's time before the PS2 the stock went from lower than it is now, to a peak of 160? Then we see a split and the PS2 release at the same time. After the split it takes another year for the stock prices to level out. How do these events factor into your analysis?
Reply
Nintendo didnt stab sony in the back, Sony was being a huge bitch about the whole project. They wanted 100% ownership of the Cd format, and all software on it. Basicly, tehy wanted to own any nintendo games that were made on CD.
Im not a big business person, but I sure as hell know its a bad fucking deal to have another company own something you make.
Reply
Though like Enron, it seems Sony are very good at the illusion of greater sucess that actual success.
Reply
dont ask me cause i dont know how they did it or how to fix it. but sony isnt running thier company very well by any means and they need to rethink their strategy. like i said i cant make any suggestions cause i dont run sony. but if sony is really as great as they have always claimed to be. you would think they could think up some solutions to their problems right now.
regretably it apears sony cant brainstorm their way out of a paper bag right now.
Reply
Surely, it will be left to someone else at Joystiq to post the upcoming slew of positive developments about the PS3, such as expanded networking capabilities, great new games, the European launch, etc. Mr. Blow is obviously comfortable being relegated to the role of perpetually petulant fanboy.
Reply
.
Reply
LMAO!
Reply
Personally, I think Sony should change their spokespeople. Namely, go from Ken Kutaragi to Katsuragi. Misato, that is.
Thanks, I'll be here all week.
Posted at 3:08PM on Mar 5th 2007 by benjamin
When I saw the caption for this, I too, thought that Kim Jong-il had taken up gaming, and that the PS3 is what convinced him to cease nuclear development. Alas, t'was not so. He just looks so "Roooonery."
Reply
HAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAH!!!!!!!!!!!!1
Reply
Reply
Never the less if that did happen Sony fans around the world are gonna revolt
Reply
That's all I've got to say about this . . .
Reply