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To: Mihaela who wrote (37618)	2/28/2000 10:06:00 AM
From: Don Green	Read Replies (1) \| Respond to of 93625

Sony's Net strategy centers on game console Got the fever? Issued: February 28, 2000 Beyond hype surrounding launch of PlayStation2 is a glimpse of company's long-term goals KAZUNARI YOKOTA Staff writer Nikkei Shimbum PlayStation fever has broken out in Japan. The symptoms are an obsession with March 4, the day Sony Computer Entertainment Inc. begins selling its PlayStation2 video-game console in Japan, and a tendency to visit the PlayStation.com Web site far too many times in hopes of ordering one of the first game consoles off the shelves. The fever has swept so far and wide that it's hard to get a clear picture of just what Sony Corp.'s realistic prospects are for its next-generation game machine with its digital-versatile-disc player and its capability of accessing the Internet through cable television from 2001. But even the pessimists agree that it's a good time to be Sony. "Sony's objective is to become an integrated company of the entertainment and electronics businesses by the year 2005 or 2010," said Nobuyuki Idei Sony's president. In five years, more than 70 million units of the original PlayStation console were sold worldwide. Can PlayStation2 top that? Analysts expect about 10 million of the consoles to be sold by year-end. And to hear Sony officials talk, you almost forget that PlayStation2 is mainly for video games. "PlayStation2 can become a basic platform for the Net," said Ken Kutaragi, president of Sony Computer Entertainment. "It will become a machine that will transcend the differences of nations, race and sex." PlayStation fever is expected to reach its peak this weekend. Sony plans to ship 1 million PlayStation2 units at 39,800 yen ($359) a pop in the first two days. On Feb. 18 Sony Computer Entertainment opened its PlayStation.com Web site for selling the game console and software. The site was immediately overwhelmed with hits - well more than the 600,000 it was braced for - and it had to be shut down for several hours. PlayStation.com took out full-page advertisements in national newspapers to apologize for the breakdown. Game enthusiasts can hardly wait to get their hands on the console, which is run by a 128-bit central processing unit that helps make clearer images and faster three-dimensional graphics. About 55,000 game fans gathered in Chiba Prefecture Feb. 18-20 to attend a PlayStation Festival where they could try the new units. "The performance is great. It's just like controlling a real race on television," said Tetsuo Tsuboi, a student who was playing a racing game at the festival. Major game-software developers said at the festival that their games had yet to really tap PlayStation's potential. "We have not used half of its ability yet," one developer said. Sony plans to release PlayStation2 in the U.S. and Europe this fall. Timing of its release in the rest of Asia has not been decided. Sony's strategy is to get as many game consoles as possible into the hands of consumers, appealing to game enthusiasts as well as those looking for a DVD player. It hopes that people will eventually use it as their gateway to the Internet. "Sony's core business is electronics, and PlayStation is placed at the center of our electronics business," said Idei. "Our personal computer Vaio, PlayStation2 and the coming set-top box for digital television will be the three gateways to the digital network." Sony's advantage in the Internet business is all the software - from music to films to games - it can provide over the Net, analysts say. Sony Music Entertainment (Japan) Inc. started a music download service from December. Sony Computer Entertainment is planning to start digital download services for games from 2001 through cable-television networks. On Feb. 1, Sony Style.com Japan Inc. started online sales of electronic products including personal computers, camcorders and digital cameras. Kazumasa Sato, president of the new Sony company, said, "We want to handle 20% of Sony's sales in the future." PlayStation.com has already started a discount on the Net, selling PlayStation2 for 38,8000 yen, 1,000 yen less than the company's list price of 39,800 yen. Sony also plans to branch out into banking to solidify its presence in the financial sector. Its bank would operate mainly online and handle settlements for Net sales. But first it must win government approval for a banking license. As Sony branches out, the PlayStation name is becoming more independent. PlayStation is not using Sony's name in its commercial films and products. "I think PlayStation is departing from Sony's strategy," said Kutaragi of Sony Computer Entertainment. "But it's not a quarrel. It is good because we are doing different things." So-net, an online service run by Sony Communication Network Corp., is also trying to grow beyond the Sony name. So-net has grown to serve 1 million users in four years. Does Sony have an Achilles' heel? Some analysts say its weak point is that it doesn't have network infrastructure. "We want the service and property around the railway, but we don't need the railroad itself," said Masayoshi Morimoto, corporate senior executive vice president at Sony. Kazushige Hata, an analyst at Kokusai Securities Co., said: "Sony expects cable television to be its base network. But it doesn't have that infrastructure, while Microsoft is aggressively taking it. "The one that grabs the infrastructure will grab the market," Hata said. Kutaragi of Sony Computer Entertainment is not worried. "I believe our investment in cable network infrastructure will expand rapidly as PlayStation2 spreads," he said. After all, Sony has what many people want on both ends of the infrastructure: a very popular game console on one end, and games, software and music on the other.