Sony Computer Entertainment to cut jobs in its US workforce

Sony Computer Entertainment is to make cuts in its 1,500-strong US workforce and review its business model amid a shift in the games industry from sales of packaged software to networking and online distribution.

Sony's restructuring in the world's fastest-growing games market follows a similar jobs cull in Europe, and comes as global sales of its PlayStation 3 console continue to lag behind those of Nintendo's Wii.

"This [ restructuring] was triggered by the launch of the PS3," the company said. "The world is moving toward a networked era and we are reviewing our business model."

Sony stole a competitive march in the gaming world with the launch of the original PlayStation and PS2. However, software developers are loath to incur the risk and high costs of making games for Sony's latest-generation console, the poor-selling PS3.

"It's like a chicken-and-egg dilemma," said one analyst. "The PS3 won't sell well until there are more software titles, but developers aren't going to make expensive, time-consuming games for a poor-selling console."

Sony said it was in the "discussion stages" with US employees, adding that it had no specific target for job cuts. It also said it had no immediate plans for a similar restructuring in Japan.

Sony's gaming arm is trying to streamline its business and cut costs wherever possible due to the massive investment required for PS3. Sony Computer Entertainment said in April it would cut up to 160 jobs in Europe - 8 per cent of its workforce there.

The division racked up a hefty operating loss of 232 billion yen in the fiscal year to the end of March, and is not expected to return to profit until at least 2008. By contrast, Nintendo's Wii console is virtually sold out across Japan, and outsold the PS3 by five-to-one last month, according to research firm Enterbrain.

However, Sir Howard Stringer, Sony chief executive, has said he is confident sales of the PS3 would "quietly accelerate".

PS3 sales have been lacklustre in Japan and the US due to its high price tag and a lack of titles. The PS3 console in Japan has sold fewer than 10,000 units a week for the past three weeks, leading analysts to suggest it may fall shy of a target of shipping 11 million consoles this year.