Andrew House will head Sony Interactive Ent. as president and global CEO.

JAN. 26, 2016 • As of April 1, Sony Computer Ent. Inc. and Sony Network Ent. International LLC are merging together to create Sony Interactive Entertainment LLC (SIE). All business units making up each of the divisions including hardware, software, content and network services operations will fall under the new entity to be based in San Mateo, Calif. From its new headquarters, SIE will oversee business operations in Tokyo and London. Andrew House, exits as president and global CEO of Sony Computer Entertainment and will head SIE with the same title. From a corporate perspective, bringing together both divisions is seen as a strategy to better expand sales and operating income for the firm’s PlayStation business by delivering an integrated experience built around high-quality games and network services to consumers worldwide.

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Impact: DFC has long held that Sony Corp. historically possessed too many independent divisions with their own agendas and intrigues. Financial hardships within its flagship electronics business led Sony to downsize and integrate its operations in recent years. The creation of Sony Interactive Entertainment makes perfect sense as SNIE’s portfolio was mostly taken up by running the PlayStation Network and the PlayStation Store, PlayStation Plus, and PlayStation Vue, So combining these business units with PlayStation hardware and software development is a smart move. Also operated by the division are the Sony Entertainment Network, Music Unlimited, and Video Unlimited. The more intriguing aspects of this merger are in the smaller details, however. Basing decisions for all things PlayStation in the United States, for example. This is another indicator of how the console business in Japan has declined in the last decade relative to the U.S. and Europe. It is hard to say how much independence the European branch might be losing in the transition. There still will be a huge presence in London under SIE, but it is interesting to note that SCEA’s president Shawn Layden is taking over as head of Worldwide Studios come April, and there are no high-level executives called out for either Tokyo or London. We don’t expect any wholesale changes in direction for the PlayStation brand as House has been overseeing everything from Tokyo, and will soon be doing the doing the same from San Mateo. Yet we do wonder how third-party game developers in Japan will adjust to these changes. There still is an appetite for home grown content in Japan even if the overall console market there is declining. But will a U.S. based SIE lead firms such as Square Enix, Konami, Capcom and Bandai to embrace more western-oriented content?

For now, the PlayStation 4 is riding high, and Sony can afford to think big organizationally. But we can’t help but believe that the increases to sales and operating income by the creation of SIE will be incremental at best. The real benefit will come down the road from a tighter focus on what needs to go into a PlayStation 4 replacement, which will rely on digital distribution and streaming a great deal more.