SAN JOSE, Calif. – The chief architect of Sony Corp.'s (SNE) flagship PlayStation game console will retire in June as the company struggles to retain dominance in the video game industry and revive its flagging reputation as an electronics and entertainment pioneer.
Ken Kutaragi, 56, an icon among gamers, will step down as Sony Computer Entertainment Inc.'s chairman and group chief executive, Tokyo-based Sony said Thursday. He will be replaced by Kazuo Hirai, who is now president and chief operating officer of the division.
In December, Kutaragi was relieved of day-to-day responsibilities as president of the video game unit but stayed on as its chief executive and chairman.
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Kutaragi's most recent brainchild, the PlayStation 3 console, came out in November but was marred by embarrassing production shortages and a $600 price tag that some Sony fans said was too steep.
For the past several months, Sony has resorted to giving away free game titles and other marketing gimmicks to spur sales.
Sony has also struggled to expand beyond the young, male demographic of so-called "hardcore" gamers.
Investors have been grumbling for several quarters that Sony has failed to attract women, young children and older gamers to its products, and its market share has shrunk as a result.
Problems related to Sony's limited demographic came into sharp focus late last year, when Nintendo Co. launched a rival game console, the Wii, for about $250.
The device — which includes a diminutive, wrist-mounted controller and a console that's skimpy on realistic graphics — has become a surprise hit among girls, suburban mothers, senior citizens and other people who have never considered themselves gamers.
Sony shipped 1.84 million PS3s worldwide through Dec. 31. In the same period, Nintendo sold 3.19 million Wiis.
The defeat to archrival Nintendo prompted Sony Corp. Chief Executive Howard Stringer to escalate his turnaround effort.
In November, the Welsh-born executive — the first foreign-born CEO of a major Japanese electronics company — demoted Kutaragi by stripping him of day-to-day management responsibilities.
Sony executives would not comment beyond a news release Thursday.
"Mr. Kutaragi has said that he has been considering this decision for some time," Sony Computer Entertainment America spokeswoman Kimberly Otzman said in a statement. "Sony and SCE will continue to seek Mr. Kutaragi's input and ideas from a broad perspective, while continuing to support him as much as possible in the realization of his dreams."
The retirement of Kutaragi — dubbed the "Gutenberg of Video Games" by Time Magazine in 2004 — will be effective June 19. After that, he'll be honorary chairman of the entertainment division and will serve as Stringer's senior technology adviser.
Although Kutaragi will remain an adviser, some U.S. gaming experts said the retirement may have been a face-saving firing and an effort by Stringer to recover from the botched PS3 launch.
"Sony had too much hype and not enough delivery," Billy Pidgeon, games analyst for the research firm IDC, said of the PS3. "Sony didn't notice that their audience was dwindling and didn't increase the base by playing to a wider demographic, and instead it played the old-school game of playing to the 18- to 32-year-old male early adopter."
The shake-up in the video-game division comes amid broader problems for Sony.
The nadir came in October, when Sony executives had to apologize for the humiliating recall of 9.6 million lithium-ion laptop batteries worldwide.
Caused by microscopic metal particles that mistakenly got inside the battery, the Sony-built batteries, in rare instances, were short-circuiting and bursting into flames.
The recall, combined with problems with the PS3, forced the company to slash its profit forecasts for the fiscal year ended March 31.
Even before the recall, Sony's future seemed troubled. The company — maker of the iconic Walkman — hasn't engineered another transcendent blockbuster. It ceded its leadership in portable music players to Apple Inc.'s (AAPL) iPod.
But David Gardner, co-founder of investment group The Motley Fool, said the botched PS3 launch was the most unforgivable mistake.
For years, PlayStation sales buoyed the company while commodity electronics limped along with razor-thin profit margins.
When the PS3 came out, the high price and paucity of cool games to accompany it prompted consumers to avoid or postpone buying the console.
Sony will have more unique games for the PS3 in the fall — but by that time, the Wii and Microsoft Corp.'s (MSFT) Xbox 360 will have sold even more units.
"PlayStation was their killer app, but the only PS3 title that's good and unique is 'Resistance: Fall of Man,'" said Gardner, an avid gamer and a financial analyst in the sector. "That's driving me crazy. I don't know who is to blame for that, but it's the biggest, most crushing and obvious mistake they've made lately."
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