Sony Online Entertainment's President Quits

SAN FRANCISCO (04/05/2000) - The president of Sony Online Entertainment (SOE), Lisa Simpson, resigned from her post this afternoon following the consolidation of the online divisions of Sony Corp.'s entertainment units this week, according to a company-wide e-mail obtained by The Standard.

A front-runner to replace Simpson is former Sony employee Kelly Flock, who might be named the division's chief executive officer, say sources familiar with the matter.

"It is with no small amount of regret that I'm writing to tell you that I (am) leaving SOE to take an exciting new role in another company," Simpson wrote in an e-mail sent to employees and to Sony Online Entertainment's board of directors at 2:10 p.m. PDT today. "I'll be happy to share the details with you in the coming days."

Executives at Sony Online Entertainment were unreachable at presstime.

Simpson's departure comes as no surprise to insiders, as rumors that other firms were courting her have circulated both inside and outside the company.

She had been approached on multiple occasions to take lucrative positions outside of the company, several company sources say. Although she turned down offers made late last year, sources say she has interviewed at companies such as BMG and Electronic Arts (ERTS) .

Simpson's departure follows announcements last week that Sony is consolidating the digital divisions of its entertainment units into a single company called Sony Broadband Entertainment. Although the details remain murky, it is understood that the unit would bring the heads of the music, films and online entertainment units under one roof to work toward delivering broadband content.

Sony Computer Entertainment America, responsible for the hot-selling PlayStation videogame console, is glaringly missing from that union.

Insiders say Simpson was unhappy about news that Flock has been offered a job at the company. Had Simpson stayed, she would have answered directly to Flock, those sources say.

Despite the suddenness of the news, Simpson's move is the latest in a long procession of defections. Richard Glosser, president of Columbia Tristar Interactive and executive vice president of Sony Online Entertainment, who reported to Simpson, left earlier this year to join teen site Bolt.com. Glosser helped to launch Sony New Technologies and to create the games-related site The Station in 1997. (The Station was folded into Sony Online Entertainment in 1998.) Roger Smith, senior vice president of programming at SOE, left in a huff in recent weeks to join Petopia.com, company sources say. And while not directly linked to SOE, Rob Tercek, who is executive director of Columbia Tristar's digital media unit responsible for Sony's interactive TV plays and who helped create The Station, also has resigned from his post. Tercek has joined Packet Video, which develops technology to stream video on handheld devices.

"The opportunities (in Los Angeles) are insane," Tercek told The Standard late last year. "It's very hard not to get caught up in the frenzy."

The defections from Sony, some say, are far from over. "People on all levels are looking to leave," says one company insider, on the condition of anonymity.

"Morale is at an all-time low."

Critics of the company, both within and without, say the defections are emblematic of deeper issues faced by the units involved as the electronics giant races to morph from a hardware-centric monolith into a major player in the networked world. "Sony Online Entertainment is the embodiment of that challenge," Smith said in a prior interview. "How well that's played out is up to the current management."

But the larger, more immediate issue, in fact, is how to plug the brain drain at Sony. The recent rash of defections has pummeled morale at the Japanese firm's online units Sony Online Entertainment and Columbia Tristar Interactive.

The internal grumbling comes at a particularly sensitive time - the units face a slew of fierce competitors -- including America Online Inc. (AOL), Electronic Arts, Uproar, Yahoo and Lycos -- ready to swipe away the market Sony created.

It wasn't always like this. Launched in 1997, the company helped establish online gaming's economic viability. It touched the top spot on Media Metrix's chart in January 1998, with 1 million registered users. By 1999, the registered users clamoring to play games such as Jeopardy Online and Wheel of Fortune had ballooned to 5.3 million. SOE also launched the highly successful subscription-based online game EverQuest, from which it generates revenues from retail sales of the boxed version and from a monthly subscription fee.

In the process, Simpson and her bicoastal, 150-employee team designed the Internet infrastructure on which the company will rely. Most notably, SOE handles ad sales across Sony's growing empire of wholly owned Internet properties, including Columbia Tristar Interactive and Sony Music Online, as well as partially owned entities such as Platform.net. Sony Online Entertainment also recently struck a partnership with director George Lucas' interactive entertainment unit Lucasarts to develop an online version of Star Wars.

But since late last year, growing conflicts have emerged at SOE. The turning point, sources say, began in late spring 1999. In an effort to slowly expand the unit's boundaries beyond online games, Smith proposed an idea in May to an online publication devoted to covering technology, culture and the Internet.

Dubbed Motherboard, the project became an ambitious play to create what one source likened to a "Vanity Fair meets the New Yorker" on the Web. To bring attention to the site, project leaders, including Smith and journalist Harold Goldberg (Goldberg is a contributor to The Standard) were given carte blanche to attract the creme de la creme talent. Insiders familiar with the project say authors John Saul, Dave Barry and sci-fi author Harlan Ellison, to name a few, were tapped to be contributors.

The Motherboard team, which consisted of about a dozen employees in New York, has created a prototype by September. When it was shown to SOE's company executives, some were aghast. At issue was a think piece on videogame violence penned by John Saul, say sources familiar with the project. Sony is one of 25 entertainment-industry defendants in a US$130 million federal lawsuit dealing with violence in games and entertainment. The suit was filed in April by the bereaved parents of three children shot to death at Heath High School in West Paducah, Kentucky.

To be sure, Motherboard never left the confines of the SOE stables after Simpson couched the project, citing economic reasons. Moreover, "the end product was a much-larger-scale endeavor," Simpson said in a prior interview.

"It had nothing to do with editorial content."

Insiders say Flock is being lured back to the company to help the unit refocus.

Previously, Flock was the president of Sony's games software unit, 989 Studios, which created hit games including football videogame Gameday.

Flock left the company after Sony Computer Entertainment folded 989 Studios back into the videogame console company earlier this year.

But company insiders say Sony of America chief Howard Stringer "and Tokyo wanted (Flock) to run SOE. He really understands the game industry and (Simpson) did not."

Sources say, however, that Flock has not yet signed a contract.

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