[A] THINGS have not been going well for Sony lately. Last month senior executives at the Japanese electronics giant issued an unprecedented apology after discovering that 9.6m laptop batteries, supplied to other computer-makers, were faulty and would have to be recalled at a cost of $436m. Sony’s Blue-ray high-definition technology, launched this summer, has suffered from delays and component shortages. "They really need some good news," says Paul Jackson of Forrester, a consultancy.
[B] In gaming, Sony faces far stronger competition than it did when it launched the PlayStation 2 in 2000. The PS2 went on to sell over 100m units, giving Sony 70% of the market. But gaming is a cyclical business, and success in one round does not guarantee success in the next. Microsoft has already sold over 6m of its Xbox 360 consoles, launched a year ago, and expects to have sold 10m by the end of 2006. Manufacturing problems delayed the PS3’s launch from May and meant that only 93000 consoles were available for the Japanese launch, Sony hopes to sell 2m by the end of the year, but even if it does so, it will start the race in third place.
[C] Yet it will be some time before it is possible to tell whether the PS3 can rescue Sony. Beneath the short-term troubles, the company is playing a long . Sony is betting that the PS3’s advanced technology will sustain the company for a decade by extending the PlayStation franchise beyond gaming.
[D] Finally, the PS3 is a litmus test for Sir Howard’s turnaround effort, one of the aims of which is to get Sony’s various divisions to co-operate more fully. Sony has improved margins in its electronics business and reduced headcount by 10 000 ahead of schedule. Sir Howard even suggested this week that the battery fiasco had helped by it easier for him to convince doubters within Sony of the need to change.
[E] Sony needs the PS3 to succeed for three reasons: to maintain its lucrative dominance of the s industry; to seed the market for Blue-ray and establish Sony in the emerging market for internet video downloads; and to demonstrate that the turnaround being led by Howard Stringer, who took over as chief executive in 2005, is working and that Sony’s gaming, electronics and content divisions really can work together. Despite the enthusiasm of the PS3’s early buyers, success in each of these areas is far from assured.
[F] American regulators began investigating the company last month as part of an inquiry into allegations of price-fixing in the memory-chip market. And having brag been the world’s most valuable electronics firm by stockmarket value, Sony’s market capitalisation has fallen to less than half that of Samsung, its South Korean rival.
[G] So a lot is riding on the PlayStation 3 (PS3), the latest incarnation of Sony’s industry-leading s console, which was launched with much fanfare in Japan on November 11th. At the Yurakucho flagship store of Bic Camera, one of Japan’s largest electronics retailers, hundreds of garners queued through a cold night. Ken Kutaragi, who runs Sony’s gaming division, was there to welcome them in the morning.
[H] The PS3 is also meant to ensure that Blue-ray triumphs over HD-DVD as the high-definition successor to the DVD video format. The idea is that millions of PS3s bought by garners will seed the market for Blue-ray, providing it with critical mass and ensuring that Hollywood studios, which are reluctant to back two rival standards, plump for Blue-ray over HD-DVD. But instead of riding the PS3 as a Trojan horse, Blue-ray has instead hobbled it by increasing its price and delaying its introduction.
[I] So a few teething problems in the early days are nothing to worry about; besides, the PS2 was also criticised for being expensive, over-engineered and unreliable when it first appeared. But having achieved 70% market share last time around, Sony is certain to lose ground this time. The only question is how much.

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[A] THINGS have not been going well for Sony lately. Last month senior executives at the Japanese electronics giant issued an unprecedented apology after discovering that 9.6m laptop batteries, supplied to other computer-makers, were faulty and would have to be recalled at a cost of $436m. Sony’s Blue-ray high-definition technology, launched this summer, has suffered from delays and component shortages. "They really need some good news," says Paul Jackson of Forrester, a consultancy.
[B] In gaming, Sony faces far stronger competition than it did when it launched the PlayStation 2 in 2000. The PS2 went on to sell over 100m units, giving Sony 70% of the market. But gaming is a cyclical business, and success in one round does not guarantee success in the next. Microsoft has already sold over 6m of its Xbox 360 consoles, launched a year ago, and expects to have sold 10m by the end of 2006. Manufacturing problems delayed the PS3’s launch from May and meant that only 93000 consoles were available for the Japanese launch, Sony hopes to sell 2m by the end of the year, but even if it does so, it will start the race in third place.
[C] Yet it will be some time before it is possible to tell whether the PS3 can rescue Sony. Beneath the short-term troubles, the company is playing a long . Sony is betting that the PS3’s advanced technology will sustain the company for a decade by extending the PlayStation franchise beyond gaming.
[D] Finally, the PS3 is a litmus test for Sir Howard’s turnaround effort, one of the aims of which is to get Sony’s various divisions to co-operate more fully. Sony has improved margins in its electronics business and reduced headcount by 10 000 ahead of schedule. Sir Howard even suggested this week that the battery fiasco had helped by it easier for him to convince doubters within Sony of the need to change.
[E] Sony needs the PS3 to succeed for three reasons: to maintain its lucrative dominance of the s industry; to seed the market for Blue-ray and establish Sony in the emerging market for internet video downloads; and to demonstrate that the turnaround being led by Howard Stringer, who took over as chief executive in 2005, is working and that Sony’s gaming, electronics and content divisions really can work together. Despite the enthusiasm of the PS3’s early buyers, success in each of these areas is far from assured.
[F] American regulators began investigating the company last month as part of an inquiry into allegations of price-fixing in the memory-chip market. And having brag been the world’s most valuable electronics firm by stockmarket value, Sony’s market capitalisation has fallen to less than half that of Samsung, its South Korean rival.
[G] So a lot is riding on the PlayStation 3 (PS3), the latest incarnation of Sony’s industry-leading s console, which was launched with much fanfare in Japan on November 11th. At the Yurakucho flagship store of Bic Camera, one of Japan’s largest electronics retailers, hundreds of garners queued through a cold night. Ken Kutaragi, who runs Sony’s gaming division, was there to welcome them in the morning.
[H] The PS3 is also meant to ensure that Blue-ray triumphs over HD-DVD as the high-definition successor to the DVD video format. The idea is that millions of PS3s bought by garners will seed the market for Blue-ray, providing it with critical mass and ensuring that Hollywood studios, which are reluctant to back two rival standards, plump for Blue-ray over HD-DVD. But instead of riding the PS3 as a Trojan horse, Blue-ray has instead hobbled it by increasing its price and delaying its introduction.
[I] So a few teething problems in the early days are nothing to worry about; besides, the PS2 was also criticised for being expensive, over-engineered and unreliable when it first appeared. But having achieved 70% market share last time around, Sony is certain to lose ground this time. The only question is how much.