Ken Kutaragi





Group Executive Officer of Sony Computer Entertainment

Born in August of 1950 in Tokyo, Japan; son of a printing plant owner.

Addresses: Office —6-7-35 Kitashinagawa, Shinagawa-ku, Tokyo 141-0001, Japan.

Career

Joined Sony Corporation, 1975; named manager for PlayStation project, Sony, 1991; named assistant general manager, computer entertainment project, Home Video Group, Sony, April, 1993; named director and general manager, research and development, Sony, November, 1993; named executive vice president, research and development, Sony, 1996; named chairman and chief executive officer, Sony Computer Entertainment America, April, 1997; named group executive and executive vice president, Sony Computer Entertainment, June, 1997; named co-chief organization officer, Sony Computer Entertainment, October, 1997; named group executive officer, Sony Corporation, 1998; named president and chief executive officer, Sony Computer Entertainment, 1999; resigned from board and named group executive officer, Sony Computer Entertainment, 2005.

Sidelights

Ken Kutaragi is a hero to video-game fans for his role in inventing the Sony PlayStation, and people who admire innovative business leaders get excited about him, too. His battles within Sony to

Ken Kutaragi
value new invention and compete in the home-video-game market have been well-publicized, and many speculated he would take over leadership of Sony someday. However, in 2005, it was announced that the reins had been handed to Howard Stringer, the first non-Japanese chief executive officer in the company's history. In the meantime, though, as the company struggles, it looked to Kutaragi's newest products to help it turn around.

Born in Tokyo in 1950, Kutaragi is the son of a businessman from the Japanese island of Kyushu who came to Japan's capital to start his own printing company. Kutaragi learned about business while watching his father, and listened when his father, ill with cancer, told him not to take over the family business but to strike out on his own. Trained as an electrical engineer, Kutaragi joined Sony in 1975. He designed a liquid-crystal-display projector in the 1970s, but Sony did not use his design, losing out to other companies who marketed similar technology with success. He developed a reputation as one of Sony's most talented engineers.

The turning point in Kutaragi's career came in 1990, when a partnership between Sony and Nintendo to create a new home-video-game system broke down. Many Sony executives wanted to give up on the home-gaming market. But Kutaragi insisted that Sony could develop its own system. He even threatened to leave Sony if it did not pursue his goal. In 1991, he won his battle: he was named project manager of a group that built a new game system, the PlayStation. The gaming console went on the market in December of 1994 and was a huge hit. It is the most popular video-game console in the world. By the end of the 1990s, it was so popular, it alone was generating 40 percent of Sony's profit.

Kutaragi's charisma, daring, and eagerness to question authority are unusual in Japanese corporate culture. In 1995, he once tried to settle a debate over the PlayStation's design by arm-wrestling a coworker. "Kutaragi is a rare breed in Corporate Japan: an engineer with vision and marketing smarts," said journalist for BusinessWeek. Winning the respect of other Sony executives took a long time. "They used to say I was merely lucky with the PlayStation," he told the magazine.

At a 1999 meeting of Sony executives, Kutaragi shocked the crowd by saying Sony needed to be shaken up. "The old guys should step aside to make way for the young," he declared, according to Robert A. Guth in the Wall Street Journal. "For years he has reveled in his role as Sony's precocious bad boy—a visionary who pitched spitballs at the company's rulers from his own unassailable perch at Sony Computer Entertainment, the wildly profitable house that his PlayStation built," wrote Steven Levy in Newsweek.

Most Japanese companies are secretive about their internal decision-making, but Sony chairman Nobuyuki Idei has often talked about Kutaragi's position in the company, acknowledging him as an important talent while saying he needs to work well with the rest of the company. It is a sign that Sony succeeds in part because it tolerates idealists and rebels more than other companies.

Kutaragi convinced the company to take another big risk on his vision when it began work on Play-Station 2. Instead of using already built components, everything in the PlayStation 2 was designed from scratch. The cost of developing it grew and grew. Other Sony executives, feeling Kutaragi needed a partner, encouraged him to enter a deal with Microsoft to produce an online video game business. Kutaragi met with Microsoft chairman Bill Gates in 1999, but no deal resulted.

When the PlayStation 2 debuted in April of 2000, it sold very well, but Sony found it difficult to mass-produce the chips inside it. The company had to pour more money into the project, bringing the development cost up to $2.5 billion. Meanwhile, Microsoft announced it would release a competing game console, the Xbox. Sony Computer Entertainment (SCE) lost money that year, nearly dragging all of Sony below the break-even point. Speculation arose in the company that Kutaragi would be nudged out. But PlayStation 2 sales rallied as more games came out for it, and SCE began making money again. The PlayStation 2 took over about 70 percent of the home-gaming market. Within a few years, SCE was generating 60 percent of Sony's profits. Kutaragi's work became even more important to Sony as the company's profits and stock price declined in 2003. Some commentators pointed to Kutaragi's new PSX, a combination digital video recorder, TV, and game player as a possible bright spot, but it ended up having disappointing sales.

As 2005 began, Kutaragi was the center of attention at Sony again. Another new product from his branch of Sony, the PlayStation Portable (or PSP), a nine-ounce gaming machine that can also play movies and music, was released in Japan in December of 2004 and sold 800,000 copies in its first six weeks on the market. Again, Sony was making a big bet on a Kutaragi product; it is producing many of the parts for the PSP itself, which kept the device's retail price down and could make producing it less expensive if it is a hit. But if it flops, the financial cost for the company could be steep. January of that year found Kutaragi at a press conference promoting the PSP, which was scheduled to be released in the United States in spring of 2005. The PSP uses flash memory and a new technology, Universal Media Disc: discs that are only six centimeters in diameter but can store up to 1.8 gigabytes of data. Kutaragi confidently predicted that portable entertainment that uses Universal Media Discs will win out over hard-drive-based devices such as Apple's iPod.

Kutaragi was talking up the PSP as Sony reported that its sales and profits for the year would probably miss their targets, in part because of tough competition from portable entertainment devices such as the iPod. Kutaragi admitted to reporters that Sony had missed out on opportunities in the portable entertainment market by not releasing a device similar to the iPod earlier. (Sony's first music players had not supported the popular MP3 format, and would only play files with Sony's format, Atrac.) Sony management had hesitated because its music and movie divisions were worried about content rights, he said. In the meantime, Kutaragi and his division worked on another innovation: developing powerful microprocessors that could take various kinds of input from broadband networks and run several products, including an upcoming PlayStation 3 home media center.

Sony's innovative spirit had become "diluted," and the company needed to "concentrate on our original nature—challenging and creating," Kutaragi said at the January press conference, as quoted by Yuri Kageyama in the Washington Post. His admission of such a mistake and his revelation of an internal company dispute were considered surprising, unusual remarks.

Journalists often suggested that Kutaragi would become chairman of Sony someday. Kutaragi disdained the idea while talking with the Wall Street Journal 's Guth. "I would need to sacrifice myself endlessly for the coming years," he says. "My health would be ruined. Some people may find it interesting. But not me." However, Guth pointed out that Sony had a history of elevating mavericks like Kutaragi to top positions to make sure the company is periodically reinvented. However, on March 7, 2005, it was announced that Howard Stringer would become the new chairman and chief executive officer of the company. Kutaragi was scheduled to resign his spot on the board on June 22, 2005, and lose his position as executive in charge of semiconductors and home electronics. He was to remain on top of the game division and take on the new title of group executive officer on April 1, 2005.

Sources

Periodicals

BusinessWeek, January 13, 2003, p. 64.

Hollywood Reporter, January 25, 2005, p. 40.

New York Times, May 4, 1999, p. C1; October 29, 2003, p. W1; January 21, 2005, p. C2.

Newsweek, October 25, 2004, p. 82.

Time, April 26, 2004, p. 93.

Wall Street Journal, November 18, 2002, p. A1; October 8, 2003, p. B5; December 10, 2004, p. B3.

Washington Post, January 21, 2005, p. E05.

Online

"Corporate Information," Sony Global, http://www.sony.net/SonyInfo/CorporateInfo (February 21, 2005).

"Ken Kutaragi," Sony Global, http://media.corporate-ir.net/media_files/nys/sne/custom/5-09-02/pdf_bio kutaragi.pdf (February 21, 2005). "Sony taps foreigner for CEO," CNN Money, http://money.cnn.com/2005/03/07/news/international/sony.reut/index.htm (March 7, 2005).

—Erick Trickey



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