The Seattle Times sat down this week with Kaz Hirai, president and chief executive of Sony Computer Entertainment of America, to discuss the PlayStation 3 and the state of the video game industry.

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The Seattle Times sat down this week with Kaz Hirai, president and chief executive of Sony Computer Entertainment of America, to discuss the PlayStation 3 and the state of the video game industry after a week of announcements about future consoles. Here is an edited version of the conversation:

Q: On paper it looks like the PS3 is more powerful than the Xbox 360. Was it important for Sony get to that point?

A: I think that looking at specs and comparing specs are always a good thing to do. People like to do that. But I think at the end of the day the consumers care more about, especially as you move into mass market, they care more about what kind of an entertainment experience am I going to get. That’s been true from Day 1 with the original PlayStation.

We’ve packed a lot of technology in this box this time around. It’s not for the sake of making sure that the numbers are higher than anybody else’s. But it’s because that’s the kind of performance that’s required to have the quantum leap in consumers’ experience when they move to the PlayStation 3 from the PlayStation 2.

Q: What do you think about not getting the PS3 out at the same time as the Xbox 360?

A: A couple of observations there. One is the fact that when we launched the PlayStation back in ’94 in Japan, ’95 here, Saturn was already out, so we were not first. When we launched PS2, the Dreamcast was already out in the market so we were not first. Being first doesn’t really ensure that you can garner market leadership. It’s more about content and the entertainment experience.

The other thing I would point out is that when Xbox launched in 2001, I think we had a North American installed base of probably about 5 million PS2s. Today we find ourselves with a difference in the installed base of about 20 million. Unless there’s still a 5 million gap, the logic holds true. But in fact, the gap has widened fourfold. So, being first to market again, that logic does not hold true. We’ve never launched first.

Q: Do you prefer it that way?

A: I think that we look at the technology curve of emerging technologies, and when we are able to pack that into a consumer product and launch it when we are ready to launch with software support, with manufacturing capabilities, when we get our ducks in a row, if you will. Whether other companies launch before or after really doesn’t have a bearing at all on our strategy.

Q: Tell me about the look of the PS3 and why you decided to go with that.

A: That’s a good question for the designer. There are elements of the PS2 in there, if you will, and we wanted to really bring that form factor and improve it at least 100 fold, if you will. We wanted to make sure that the curves felt more inviting, more — what’s the word? — organic. Not so cold and industrial, if you will, this time. I think the designers have done a fantastic job in accomplishing that.

Q: Will the PS3 be out before the next E3?

A: Hard to tell at this point in time. All we can say at this point in time is really spring of 2006.

Q: Why did you spend nearly all the briefing talking about the PS3 and not the PlayStation Portable and some of the PlayStation 2 games?

A: That’s a very good question, and I get a lot of questions on that. We just had so much exciting information to share with everybody and all those visuals to share with everyone that we were just bursting at the seams. The press conference was obviously more than an hour and a half just talking about PlayStation 3.

We thought as far as the success and the continued success we’re having with the PS2 and the PlayStation Portable, we can talk about that on one-on-one meetings. People have grown accustomed to me going up there and just going through all the numbers. I said, “You know what, maybe it’s a good change of pace as well. I’ll just go up there and introduce Ken (Kutaragi, head of Sony’s PlayStation group) and let the technical information and let the images speak for themselves.”

Q: Explain Sony’s online strategy. It doesn’t seem to me as clear as what Xbox is doing with Xbox Live. What are your thoughts on online in the next generation?

A: That’s going to be a very integral part. I liken it to air conditioning in the car. It used to be nice to have in the ’60s, at least when I was growing up, but now I don’t think you’ll find too many cars without air conditioning. It’s a definite must-have. It’s going to be an integral part of the PlayStation 3 experience.

The challenge that we have is to make sure that we are able to also provide a world, an online world, where consumers can take advantage of the PlayStation Portable that they have, and to use that as a device that works in tandem with the PS3. For example to play games on the other side of the world.

We do have the largest online user base in any of the consoles. So we want to make sure that we also include the PlayStation 2 users in that experience, to the extent possible. We don’t want to shut them out, or just keep them in the PS2 world where everybody else is enjoying the PSP/PS3 world. So that’s an added challenge that we have that others do not.

So those bring out specific challenges that we need to work through, and to also bring out a comprehensive online program from Day 1 as opposed to a program that gets changed every two months or what have you. I would much rather wait to make sure we have something that we are happy with, that the publishing community is happy with, and put it out even if that means that it takes a bit longer than people expect.

Q: Could you see Sony going with a broader, more centralized, community-focused online experience?

A: I think community focus, centralized, to a certain extent, yes. Those I think are very important. That’s one of the findings that we’re seeing in our online community when we talk to them. But we want to make sure that it’s not too controlling, because that’s the tradeoff that you have there. It’s a fine balancing act that you need to strike the right balance with centralized, and feeling like you’re a part of the community without being forced into that.

Q: What do you think about the possibility of microtransactions, or at least enabling developers to get more revenue beyond the initial purchase at the store?

A:. I think that is a very important strategic way of making sure that you get additional revenue over and above just selling the initial game. Depending on some games, subscriptions work better. But for the most part, I would say that the microtransactions probably are a more convincing business model to present to the consumers.

Q: Microsoft and Nintendo are fully behind the idea of microtransactions and are working that into their business model. Will Sony have that same emphasis?

A: I think that at least in the North American market, which is what I look after, I think the microtransactions have again more weight. It’s easier to have the consumers accept that than a monthly recurring subscription.

Q: What’s your thought on subscriptions?

A: I think it works for some games, some genres. But in my mind it’s very difficult to expand that to a larger user base, at least until such point in time, maybe it’s two, three years from now — I don’t know how much — where consumers become really accustomed to the idea of recurring subscription charges, much as they do on cable TV, for example. Pay per view is obviously there, but it’s a smaller percentage of the recurring subscription revenue. Even on music downloads, I think that the 99 cents per song model is a lot more convincing than you have to pay X number of dollars every month and you can download as many as you want.

Q: What do you think Sony’s advantage is going into the next-generation console battles?

A: It’s really the technology that we bring to the table combined with the track record and also the continued ability between first-party studios and third-party studios to bring out fresh, compelling entertainment content that really takes advantage of the first prong, which is the technology. And also the relationship that we’ve built with the consumers over the past 10 years.

I think those three factors combined with flawless execution is what’s going to propel us for the next 10 years as well. Technology is very important, and it fuels our business, but it’s what you do with the technology that’s just as important.

Q: I’d like to ask you the same about Microsoft. Speculate on what you think Microsoft’s biggest advantage is heading into this next-generation battle.

A: That’s a good question. At least they have a clean slate, I guess. They don’t need to look after the people that have joined their family, if you will, as much as we do. We have, as I said, a very loyal customer following that we want to take along for the ride for the next 10 years and hopefully expand on that.

A case in point really is that to this day we’re still in the PlayStation business. More important than that, PlayStation 3 will play your PlayStation games. It’s not enough for us to go in there and say, “It’s backwards compatible, sort of.” That doesn’t work for us. If you don’t have a large installed base, you have the luxury of [he waves] doing this and starting fresh.

Q: Is backwards compatibility technically hard to do?

A: It’s not that difficult to do in terms of the overall technology that we’re bringing to the table. I’ve always said that by adding backwards compatibility, there is no down side. If it’s going to add $500 or even $50 to the cost, well, that’s going to be a challenge.

If there’s a huge detriment that comes along with making it bacvkwards compatible, we’d think twice about it. But we haven’t had those hurdles. It will be an incremental cost, obviously. But that cost is more than compensated.