Sony Computer Entertainment, which earlier this month launched its latest game console, the PlayStation 3, said Kazuo Hirai , head of its U.S. operations, will become president and fill the vacant chief operating officer's position.
"Kutaragi will set a long-term growth strategy while overseeing daily operations. But by putting someone in the COO's position we can allow them to share workloads and add depth to management," SCE spokeswoman Yoshiko Furusawa said.
The PS3 went on sale on Nov. 11 in Japan and Nov. 17 in North America, going into battle with Microsoft Corp.'s (MSFT) Xbox 360 and Nintendo Co. Ltd.'s new Wii machine in the $30 billion video game market.
"I believe the new SCE management team will work even more closely with Sony HQ," Sony Chairman and Chief Executive Howard Stringer said in a statement.
"PlayStation 3 is the most important product in the Sony Group. We will work to establish it as a major platform, concentrating significant resources of the group including game, electronics and entertainment," Stringer said.
Sony, which has dominated the video game industry over the past decade, has packed the PS3 with its latest technology including the Blu-ray Disc high-definition DVD player and the Cell microchip , dubbed a "supercomputer on a chip".
But these advanced functions don't come cheap. Sony is expected to rack up a loss for every PS3 it sells, and it forecast an operating loss of 200 billion yen ($1.7 billion) at its game unit for the year to March.
The PS3 rollout has not been plain sailing for Kutaragi, who was forced to postpone the European launch by four months to next March due to a production glitch.
"At Sony, titles like CEO and COO carry more weight than president and chairman. So this probably does not mean Kutaragi is stepping out of the front line. He is still at the helm," Daiwa Institute of Research analyst Kazuharu Miura said.
SCE also said director Akira Sato will become vice chairman.
Sato's experience in game software is expected to help SCE, which has been seen by some industry specialists as a hardware-heavy game maker, in striking a balance between game software and hardware, Daiwa's Miura said.
Sony said that Jack Tretton would replace Hirai as chief executive of Sony Computer Entertainment America.
Tretton was formerly co-chief operating officer of the America gaming division and was part of the original management team given the job of launching the first PlayStation in North America in 1995, the company said.
Prior to the announcement, shares in Sony closed up 0.2 percent at 4,580 yen, underperforming the Tokyo stock market's electrical machinery index, which gained 0.53 percent.