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Fri, Jan 21, 2005 - Page 12 News List

Sony official cites strategic mistake

PROPRIETARY VIEWS Concerns over protecting content rights have prevented the firm from launching gadgets like Apple's iPod, but this is changing, the executive said


Sony missed out on potential sales from MP3 players and other gadgets based on widespread formats because it was overly proprietary about music and entertainment content, the head of Sony Corp's video-game unit acknowledged yesterday.

Sony Computer Entertainment Inc President Ken Kutaragi said he and other Sony employees have been frustrated for years with management's reluctance to introduce products like Apple Computer Inc's iPod, mainly because the Tokyo company had music and movie units that were worried about content rights.

Now, Sony's divisions are finally beginning to work together and share a common agenda, Kutaragi said at the Foreign Correspondents Club in Tokyo.

"It's just starting," he told reporters. ``We are growing up.''

High-ranking Sony officials have rarely publicly said their proprietary views were a mistake. Kutaragi, who has long been viewed as a candidate to lead Sony, was unusually direct in acknowledging Sony had made an error and blaming proprietary concerns from its entertainment division.

Sony's music players initially did not support MP3 files and only played Sony's own format called Atrac.

Kutaragi said Sony's original spirit of innovative technology had grown "diluted."

"We have to concentrate on our original nature -- challenging and creating," he said.

Once the powerhouse of global electronics, exemplified in its Walkman, Sony has lost some of its glamor lately, losing out in profitability and market share to cheaper Asian rivals.

Kutaragi -- known as the "Father of the PlayStation" for making the game machine a pillar of Sony's business -- said the new handheld, PSP or PlayStation Portable, will grow into a global platform for enjoying music and movies as well as games.

Planned changes

* Previously, management has been reluctant to introduce items such as music players due to concerns at its entertainment units about protecting content rights

* Sony's business divisions are now starting to work together on a shared agenda

* The company also plans to turn its PlayStation Portable game player into a platform for music and movies

Sony is boosting production to 1 million a month this spring to keep up with demand for the PSP, which has sold 800,000 since going on sale Dec. 12 in Japan, Kutaragi said.

It is set to go on sale in the US and Europe this spring, with targeted global sales of 3 million by the end of March.

PlayStation is one of Sony's most successful products, selling 180 million worldwide, combining the original PlayStation and PlayStation 2 sales.

PSP, which already plays MP3 files and stores digital photos, will offer music and movies as downloads as well as on its own UMD, a tiny disk now used for game software.

Sony yesterday also lowered its sales outlook yesterday for the fiscal year ending March 31, blaming poor performance and growing competition in its core electronics sector, but the company lifted its profit forecast.

The company expects group net profit of ?150 billion (US$1.5 billion), up 69 percent from ?88.5 billion the previous year and better than its earlier forecast of ?110 billion (US$1.1 billion).

Sony said better results at its US subsidiaries in reducing income tax expenses were behind the brighter forecast but refused to give details.

The Tokyo-based electronics and entertainment giant lowered its sales forecast for the fiscal year to ?7.15 trillion (US$69.6 billion), down 5 percent from ?7.49 trillion the previous year.

The company had initially expected sales of ?7.35 trillion (US$71.5 billion).

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