[If you haven't already, be sure to check out Part 1]

GameDaily BIZ: What do you make of Ken Kutaragi's recent statement to Reuters that Sony's hardware business is losing strength?

Jack Tretton: The honest answer is that I obviously wasn't there when the interview was conducted. I don't know if it was conducted in Japanese or in English. I only read the news accounts of it just like you did. I've done enough interviews that I know a lot of times quotes can be take out of context. I would say that without speaking for Kutaragi-san that I think it was probably stated in the context of disappointment that we weren't able to launch in Europe and we weren't able to hit the initial launch quantities that we'd like and not that as a company our hardware capabilities are at all in decline.

And I think hardware for a company that's as diverse as Sony is, my first question would be, "What do you mean by hardware?" Is hardware TVs? Because we just went from No.4 to No.1. Is hardware gaming? Because we haven't even put out our new platform and in the face of the competition we continue to be No.1. So I would have to clarify what hardware is and question what context it was answered in. Certainly based on how it was reported, if he did mean it that way I would respectfully disagree with him.

BIZ: I think you understand why this was such a big headline, though. For someone as bold as Mr. Kutaragi to admit that Sony might be in decline in any way is kind of shocking to read.

JT: I would be willing to bet anything that it was taken out of context, and if he said it, he certainly wasn't referring to Sony's corporate strength because I've been here for 12 years and I can tell you that they've never been healthier than they are right now.

BIZ: Ever since E3 there's been a kind of domino effect with the negative perception surrounding Sony and analysts proclaiming all sorts of doom and gloom. How does Sony fight this perception that maybe they're not No.1 anymore?

JT: Until somebody knocks you off, you're No.1. And we continue to be No.1. And I think when you predict the future, it's boring to predict that the No.1 will stay No.1. It's juicy to predict that No.1 could possibly fall. I think we've been facing this since the day we entered the market. "There is no way that Sony could dominate the market in the face of two formidable competitors, like Nintendo and Sega that have such a gaming heritage." But we did it. "There is no way that Sony can repeat the success that they had with the original PlayStation. Do you know that over the course of the industry no company has ever dominated two life cycles in a row?" But we did. We've faced this throughout our entire history and I think it's just par for the course. If you look at a lot of the quotes from back in '94 and you look at a lot of the quotes in '99 or 2000, they were all saying the same things. And I think if you look at any market leaders in any industry or any form of entertainment, what sells magazines with the stars? The fact that their movie was very successful and they give a lot to charity or that they gained ten pounds and got stopped for DUI?

People thrive on bad news and they like to see people with a lot of success or companies with a lot of success have missteps, so I think it's just culture in general and the fact that people root for an underdog and that bad news sells. And I think that if you're in a leadership position, people are going to want to dwell on the negatives more than they're going to want to dwell on the positives and that just comes with the leadership position. And I guess we're ok with that because ultimately the audience that we have to serve is the consumer and they vote with their wallets every single day. They continue to vote for our platforms every single day and we're hopeful that with PS3 we've given them another reason to vote for us with their wallets, but time will tell. I'm quite confident given the technology that we have to offer but ultimately it's all speculation and speculation to me is kind of tiring; I'd rather deal with the realities and let the future play itself out.

BIZ: How much pressure does Sony's game division feel in relation to positioning the PS3 as a key product for Sony as a whole?

JT: Well I've been here for the entire history of Sony Computer Entertainment, at least in the U.S., so I'll give you the contrast. The contrast was that back in 1995 nobody knew who we were not only in the industry, but nobody knew who we were within Sony. We were these crazy guys that were going to be in the video game business; we were kind of an afterthought to our sister companies. And now, 10-12 years later we clearly have been for some time a very high visibility division and really a profit driver corporately, so that is a banner that I think we take a lot of pride in but it's also something that comes with a fair amount of pressure to continue to deliver. But I think if you're an organization that's competitive and prideful that's a position that you want to be in... the type of person who wants the ball with the game on the line and I think as a division we're comfortable in that role.

I think the role has changed not only from a financial standpoint to the fact that with the advent of multimedia capabilities of our systems we have more parallels to the other divisions than we did in the past. Because the PS3 is such a graphically intensive and powerful machine I think we will have an impact and we have had an impact on the interest in high-definition television, and that will certainly have benefits for the electronics division at Sony. I think the fact that we'll have a Blu-ray player [in the PS3] it's not a secret that the entire Blu-ray consortium is counting heavily on the success of PS3 to help usher in that technology, and then given the fact that we're affecting hardware in that way I think we'll obviously have a big effect on software content beyond what we've been able to do in gaming. We're going to help, if we're successful, sell a lot of prerecorded software in the form of Blu-ray and we'll continue to bridge other forms of entertainment that Sony's involved in, like music, etc., etc. So I think that we have a lot more crossover with sister divisions than we did back in '95 when we introduced the original PlayStation. So those are facts and most of those as far as I'm concerned are tremendous benefits, but it does come with a higher degree of awareness and a higher degree of expectations.