From Washington, D.C. to Foster City, California, the word of the day is, apparently, "relevant." An embattled President Bush used the R-word yesterday morning during a press conference to explain why he decided to veto a children's health insurance bill supported by both Republicans and Democrats. That's why it echoed in our minds during a conversation yesterday afternoon with Sony Computer Entertainment America CEO Jack Tretton, wherein he used the word "relevant" ten times in just 12 minutes while referring to the similarly besieged Playstation 3 and its predecessor. Was this a confident recitation of the facts or merely a wishful talking point? We'll let you be the judge. But based on what our sources are telling us, if the PS3 had a power animal, the September sales gap between the Sony's flagship console and those of its two competitors would see the PS3 represented by a duck—one as lame as the current occupant of the Oval Office.

Nevertheless, the purpose of Tretton's call was to give us an advance briefing about two bits of news intended to finally make the PS3, um, relevant. First, the 40 gigabyte Playstation 3 that had been announced two weeks ago in Europe will be available in North America on November 2nd, bundled with a free "Spider-Man 3" Blu-Ray disc, for $399. Second, effective immediately, the price of the existing 80 gigabyte model will drop from $599 to $499. Having already received a draft version of the press release, we cut to the chase and asked Tretton a series of questions about how and why Sony decided to remove PS2 backwards compatibility entirely from the new $399 model, a decision that we strongly criticized in a recent post. We also inquired about the current state of various unfinished aspects of the PS3 platform, as well as Tretton's thoughts about the PS3's prospects going forward. Here's what he had to say.

When was the decision made to remove backwards compatibility entirely and why?

Well, I think we have long consternated over the issue of bringing tremendous technology to the consumer, something that's really going to be ahead of its time and carry this industry for the next decade, and the challenge that presented in terms of the retail price point we had to offer. So the goal was trying to reduce the price point of the Playstation 3, but keep all the features that we thought were incredibly relevant to the future going forward. We feel like we've been able to accomplish both at $399. We've got a price point that I think can finally attract the masses, and we've kept all of the features that we think are incredibly relevant to the Playstation 3 in there.

Does Sony plan to keep manufacturing the 80 gigabyte version of the PS3 that has the combination of software and hardware backwards compatibility?

In this industry long-term plans are six months out, but we intend to keep the Playstation 3 80 gigabyte model actively available and incredibly relevant for the North American consumer for the foreseeable future.

You only sort of answered the question. Are you saying that you've manufactured a lot of the 80 gigabyte models, and you're going to sell them as long as there's demand, or is it in fact still being manufactured?

Well the honest answer is that as a matter of policy, we've never publicly commented on our manufacturing plans. I know that's happened in the past, but that certainly hasn't been our policy. Our policy is to just state availability and long-term SKU plans, and the 80 gig remains very much a part of our plans for North America going forward.

In determining which were the key features that had to stay and which were the ones that could be allowed to go, what was the thinking specifically on backwards compatibility?

The big difference between backwards compatibility on our machine and some of our competitors, you're talking about a machine in the PlayStation 2 that remains incredibly relevant, has a 120 million unit installed base, is going to go on and sell an additional 10 million units of hardware this year. We're the only company that has two relevant consoles, and we feel that the PS2 remains incredibly relevant and remains supported in the PlayStation 2 itself. In the face of our competition, those machines don't exist anymore at retail, so the only way you're going to be able to support that platform or play that platform is through backwards compatibility. We've chosen to focus on PlayStation 2 through PlayStation 2, and focus on Playstation 3 as part of the future and the PS3 software experience.

[Playstation CEO] Kaz Hirai said in 2006, "I think that when we ask the consumers, or the gamers to make an investment in software, that it's our responsibility to make sure that the future consoles that we bring to market, including a Playstation 3, is able to actually play all these titles that the consumers have really spent a lot of money in, and invested a lot of money into really a master library." Doesn't the removal of backwards compatibility for PS2 games from the PS3 represent a betrayal of what the Playstation brand stands for?

I guess the way I tend to look at it, N'Gai, is if I'm a consumer, and I paid $599 for the Playstation 3 when it launched, I got backwards compatibility and I got Playstation 3 technology. Today, for $399, I'm able to get all the same technology in the Playstation 3, and for $129, if I don't own a PlayStation 2, I can buy that as well at any retailer in North America. So for a total investment of $529, I've got two machines that do everything the same machine did a year ago at $599. So it's hard for me to see that as a negative for the consumer.

In terms of the new price, PS2 sold 10 million plus at $299, then did an incredible amount of business at $199. $399 is closer to that, but it's still above the price points where did the bulk of its installed base move. How confident are you about this new price in terms of picking up steam for PS3?

People have to look at technology and hardware individually as opposed to saying a machine is a machine is a machine. Because if that was the case with televisions, you'd never see a TV above $499, but people are investing thousands of dollars in high-def TVs. The technology in a Playstation 3-—the CELL processor, the Blu-Ray drive, Blu-Ray movie playback capability, HDMI, built-in Wi-Fi—is really not an apples-to-apples comparison to the PlayStation 2. The PlayStation 2 is a great machine at $129, but I don't think there's any comparison between the PlayStation 2 at $299 or $199 and what the Playstation 3 is at $399. It's a machine that does things that the PlayStation 2 could never or would never do, and at $399, I certainly hope and believe that consumers would see the value in that.

I know that it's only coming up on a year since the launch. But PS3 was in development for several years, yet developers are still complaining about the hardware. You've got games like Madden that are running at half the framerate that they do on 360. You've got several multiplatform game titles like Medal of Honor and Stranglehold that are shipping later on PS3 than on 360. There's still no unified online community features. There's still no media store for movies and TV shows. And here in North America, the flow of downloadable PS1 titles is a trickle, compared to Japan, which gets a regular stream of releases. What I'm wondering is, why does the PS3 still seem like a moving target a year after its launch?

You're asking several questions there, so I'll attempt to answer them one at a time, and if I miss one, feel free to go back to 'em. I'll start at the end first. As far as PS1 games being offered in Japan versus a trickle in North America, we've proven that every market operates differently. Consumers have different needs and the regions have different approaches to the business. I certainly stand on our success in each of those markets when I say a one-size-fits-all approach doesn't work and that's why our machines have been so relevant on a worldwide basis, because we've been able to strategize for each market in terms of what works best.

The other thing you need to do, with anybody who follows this industry, is remember that people have selective memories. You pointed out the fact that Madden is only running at thirty frames per second. The machine hasn't been out there a year yet. I think a lot of people forget that. The second thing is that we've heard that our machines are hard to develop for, because the technology is fairly forward thinking. We've heard that on the original PlayStation, the PlayStation 2 and the Playstation 3. If you contrast the fact that Madden is running at 30 frames per second less than a year after the introduction, EA didn't even launch Madden on the original PlayStation. So we've certainly dealt with this before, we've heard the same criticisms of the PlayStation 1 and the PlayStation 2, but at the end of the day, the developers got up to speed, the consoles enjoyed an extremely successful long ten-year roadmap.

There are other machines that may have been easier to develop for early on, but certainly didn't have the staying power, based on what happened historically. Certainly that's our hope and expectation with Playstation 3. If it's put in a perspective of ten years, the first 8-10 months is taken relative to getting out the gate quickly and potentially fizzling out in less than ten years. That's certainly never been our intention. We sacrificed short-term challenges for long-term wins.

Two things. To your point about the PS1 games in North America, I think the challenge you're facing is that there are announcements that are made globally, and journalists like myself as well as hardcore gamers, we pay pretty close attention to those announcements. I'm not sure that there was anything said publicly for North America about you taking a different approach to PS1 downloads. We had to infer that for ourselves. So—

There's certainly a history there. There were thousands more titles brought out for the PlayStation in Japan than there ever were in North America and Europe, so obviously not every game comes to every territory. The SKU strategy, the pricing strategy, is something that I think has been pretty consistently diversified over the last ten-plus years. So while as you pointed out, gamers through the Internet and the press certainly pay attention, the average American consumer bases a lot of their knowledge and their experience based on what they do at retail, what's available and the way the machine is marketed to them in that individual market. We haven't necessarily gotten to a worldwide marketplace in gaming where people are buying PAL machines and machines in Japan and software out of each market, though I do think that is going to become more and more prevalent with online gaming.

With the continued success of the Wii; I'm also hearing that Halo 3 sold incredibly well software-wise, I'm hearing that it moved hardware, how confident are you feeling about your position through the end of this year, and in 2008?

In terms of the realities of the market and the success of our platforms; the great software that we've been able to bring to it; most importantly, the consumer satisfaction and the consumer adoption-—we couldn't be happier. The fact of the matter is, PlayStation Portable is having a great year; its best year in the three years that it's been on the shelf. We're experiencing tremendous growth, not only in our market, but on a worldwide basis. The PlayStation 2 remains incredibly relevant; we'll sell over 10 million units, and it's sold an incredible amount of software to date this year-—160 new releases just in this market for it, when its former competitors are almost forgotten and certainly no longer relevant in the marketplace.

Despite the fact that the Playstation 3's been out there less than a year, we're very optimistic based on the success that we've enjoyed to date, and the excitement that we have about the holiday season based on the software lineup we have. We have three very relevant platforms. Two consoles, which means that our overall sales are up significantly. This will be the biggest year that we've ever had. So in those terms I don't think we could be happier.

Great, Jack. Thanks very much for your time. I appreciate it.