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Meet the man behind Sony's PlayStation

Industry Standard
Kutaragi sees the PlayStation2, which releases in the U.S. in October 2000, as a vehicle for all kinds of broadband entertainment  

(IDG) -- You'd think the man behind the Sony PlayStation -- the fastest-selling consumer electronics device in history -- would drive an Audi TT, brandish a silver Nokia, wear a leather jacket at the very least.

But Ken Kutaragi looks about as edgy as a game of Pong. The stocky 52-year-old CEO of Sony Computer Entertainment quietly enters a conference room in PlayStation's Tokyo headquarters, opens his double-breasted jacket and exposes a necktie as drab as airport carpeting.

Then he starts talking about Sony.

The company is "getting old," he growls, sliding forward to crouch at the edge of his seat. It's his division, Sony Computer Entertainment, that is "the clear leading power for the network, for the next generation."

Asking Kutaragi about his parent company is like pushing the "on" button of a PlayStation game console: He bursts to life, gushing the sort of animated commentary almost never heard from the archetypal Japanese executive.

Then again, jabbing at the corporate hierarchy is a bit less risky when you're in charge of a product that accounted for nearly 40 percent of Sony's profits in 1998. PlayStation is now the game console of choice in every hip 'tween, teen and GenX living room worldwide. More than 72 million units have shipped since the system's 1994 release.

PlayStation2, due for U.S. release on October 26, promises to be even bigger. It delivers a faster, more realistic experience than any consumer gamebox ever made. When it went on sale in Japan earlier this year, PlayStation2 (PS2 to its fans) was an instant phenomenon. Customers lined up outside stores in Tokyo's famous Akihabara electronics district and bought nearly a million units in the first three days, 2 million units over the first 82 days. Sony's international marketing plan calls for the shipment of 10 million PS2s (to retail for $300) by next March.

Sony executives do not always appreciate Kutaragi's brash style, but it's hard to argue with numbers like those. "They are the parent," Kutaragi says of Sony. "We are the child. We will lead, we will be the driver for the rest of the company."

After starting -- and misfiring -- with previous Internet strategies, Sony has handed the wheel to Kutaragi. The electronics manufacturer has decided that if it wants to stay relevant in the broadband age, Kutaragi and his PS2 are its best shot.

It starts with your television. When broadband comes to your house, it will arrive on your TV screen and bring the Internet with it. You'll be able to do all sorts of things on the tube -- read e-mail, download movies, go shopping. The economic potential is huge, and heavyweights like Microsoft, AOL and Sony are all jockeying to build a set-top box appealing enough to insinuate itself at the nexus of this TV-Internet convergence.

Kutaragi sees PS2 as Sony's Trojan horse. The idea is that consumers will bring the device into their living rooms to play WipeOut and Crash Bandicoot and end up using it for all kinds of broadband entertainment. If everything goes according to Kutaragi's plan, PlayStation will lead Sony in a transformation from a producer of games, gadgets, CDs and movies to a "broadband delivery company." Future versions of the console will still give you games, but also music, online shopping, even interactive services. Already Sony has signed a deal with J.P. Morgan to deliver home banking through the PS2.

To handle functions beyond game playing, Sony has beefed up the PlayStation2 to near-PC strength, embedding a 300MHz processor. Other companies are pursuing a similar strategy. Microsoft's Xbox, targeted for release in late 2001, is a game console on the outside, but inside it's a full-scale Internet appliance, with a hard drive and a 650MHz Pentium III processor that makes it twice as fast as the PS2.

But Kutaragi isn't standing still. He's already at work on -- that's right -- PS3, a much stronger and, more significantly, stealthier PlayStation. "PS3 will totally disappear as a console, as a shape," he says. Sony may even cease making boxes altogether and instead sell PlayStation3 chips to other game-machine makers for use in their own units.

And it doesn't stop there. Sony anticipates a day when most of the appliances in your home -- your stereo, your TV, your PC -- will be connected to the Web, and to each other, via PlayStation chips. To meet the expected demand, Kutaragi's division plans to invest $1 billion in its already massive semiconductor production capacity -- "like Intel," he says.

The scope of the scheme is vintage Kutaragi. But then you have to be a visionary to see the potential in something as nebulous as broadband entertainment. Less than 5 percent of U.S. households now have high-speed Internet access, and Jupiter Communications predicts that only 20 percent will have it five years from now.

The short term looks even less inviting. The market downturn last spring sent broadband entertainment companies scurrying back to the drawing board. High-profile Digital Entertainment Network folded. Entertaindom, Time Warner's vaunted entertainment megasite, lost its senior management and is now restructuring.

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Sony has had to do some retooling of its own. In the first two quarters of this year a number of key executives either left or were laid off from Sony U.S., including Sony Online Entertainment chief Lisa Simpson. This, in turn, has slowed the company's progress in arranging Internet content and distribution partners. So far it has none.

Kutaragi faces rivals inside and outside Sony. The company's famously territorial music, movie and electronics units are furiously pursuing their own -- not necessarily complementary -- strategies. Outside challengers include Microsoft and its Xbox; Sega, which is months ahead of Sony with its own online games network; and Nintendo, which, though a dark horse, may yet emerge victorious in the race for interactive entertainment.

But Kutaragi -- "KK" to his friends -- is nothing if not competitive. He'd better be. Sony is betting billions on him.

Kutaragi's engineering genius is at the heart of the PlayStation -- and an object of admiration among his colleagues. But perhaps more valuable is his "tremendous fearlessness," says Trip Hawkins, who has known Kutaragi for a decade. Hawkins, CEO of American game-publishing company 3DO, once tried to market his own multimedia set-top box, built in collaboration with Matsushita; it failed. One of the qualities he admires in Kutaragi is his ability to "ignore the signals that tell you not to do something."

Kutaragi learned the value of determination early in life. He was born in postwar Japan in 1950, the son of a tradesman. Every night after school he went to work in the family printing business until 11 p.m. Despite the grueling schedule, he was a straight-A student in elementary school in all but two subjects: P.E. and social studies.

"My homeroom teacher told me I wasn't cooperative," Kutaragi told Reiji Asakura, author of Revolutionaries at Sony, a PlayStation biography published this year in English by McGraw-Hill. "I used to get mad, thinking I was being singled out."

When Kutaragi graduated from the University of Electro-Communications in Tokyo in 1975, he was convinced he could thrive only inside a company that was, like him, nontraditional Japanese. So he chose Sony -- in fact, it was the only place he applied. Unlike most other Japanese multinationals, which maintain strict corporate hierarchies based on education and connections, Sony has a meritocratic system that rewards talented engineers and researchers.

He began his career there developing LCD technologies and eventually caught the eye of Sony's revered cofounder, Masaru Ibuka, who urged Kutaragi to apply his LCD work to the company's audio products.

Behind the scenes, Kutaragi was part of an '80s rogue movement within Sony to transform the company from the analog world of radios, recorders and TVs to the digital world of compact discs and computers. When Kutaragi urged his colleagues to join him in his work on digital technology, he often met with reprimands. His peers considered his ideas strange, even taboo.

Kutaragi won them over -- or ran them over. "He's the most animated and passionate person I've ever known," says Kelly Flock, CEO of Sony Online Entertainment and former head of 989 Studios, the only U.S.-based PlayStation game-development studio co-owned by Sony. "It was unusual to see a Japanese manager display that kind of emotion."

Flock recounts one of his early meetings with Kutaragi, in January 1998. "'If you can't get those numbers you should quit!'" he recalls Kutaragi thundering at the 989 Studios managers. "At that point, Ken would fire me," Flock says. "It's something you expected. If Ken hadn't fired you at least once, he probably didn't like you."

He laughs. "At the same time," Flock adds, "he'd say that his role was to try to make people's dreams come true."

Click here for an unabridged version of this story.

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Digital Entertainment Network
Jupiter Communications
The 3DO Company

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