E3: Peter Moore

That was a strange comment, you know. I'm not going to get involved in that, but saying they've never had a business relationship with a publisher to make content for the PlayStation platform...

I don't know if it's their policy now. I certainly - I find it a stretch to believe that business arrangements, marketing money, development money - this is what our industry does, we work with our partners and we figure out how we can make a game sell better. We do it all the time, and we're not shy about saying we'll sit down with publishers and ask how can we invest in making your game better on our platform. We did it for example with Guitar Hero, and it worked out very well - and there was a business arrangement involved there, and I'm not shy about saying that - but Jack made a statement and I'm just not going to get lured into a battle with Jack. He knows how to run his business.

Very difficult decision, but in some instances a very easy decision. We had not done right by the consumer, it was becoming very apparent to us in the last couple of months that we had a number of issues that were creating this problem - the three flashing red lights - and from all the way to the top of the company it is not easy to take a billion-dollar charge. Anything that begins with a 'b' is a lot of money. But we had to do it. We needed to do it.

It was not easy, but one thing people have to understand is how difficult it is when you sit down, you look at your business, and your employees and everyone in your team that has given sweat, blood and tears to get this thing out and you have to make this admission like this that we hit an unacceptable failure rate.

It was a tough day - a really tough day. But I like to think we did the right thing. Even then you get criticised for doing the right thing - you say look, your arms are up and I've apologised to everybody that's had this, and we're going to take care of people, and what we're doing at three years is pretty much unprecedented, but we need to do that - we really need to do that.

Well, it's expensive. As well, this is complex to roll it out. All you guys see is a billion dollars and three years, and three flashing red lights. What we see is global repair and refurbishment centres have to get geared up because the worst thing we could do is give you a bad experience again now, making sure we capture all the cost because you've got a fiscal responsibility to the corporation and the shareholders to sit down and go through all the costs - it would have been no good saying it's 800 million and then saying next quarter, you know what, it's another 300 million.

You have to...a lot of people got involved, you have to calculate every penny, as difficult and painful as it is, to make sure every customer is taken care of here. And we needed to make sure that...the logistics were unbelievable, getting it done, and then when you file something out of cycle, as we did before earnings - our earnings are not until the next couple of weeks - then there's complexities of reporting periods. We also needed to take the charge in the fiscal year that just ended, so without boring you with all the details of this whole thing, it takes a while.

The most important thing though is we needed to make sure we'd figured out all these numbers of issues, because not figuring out, and not getting the fixes in, and not improving the process, and getting the testing process down - which is the real key - and making sure that we get accelerated live testing and figuring out where all these problems are - there's no one systemic issue, you know, there's a number of factors that combine to this general hardware failure, as we call it.

Because we look at it as...because, again, there is no one problem that's causing it. It's a number of environmental issues. We look at it, and we started to look at this thing - literally you're getting in the field 12 to 14 months of experience of people using the consoles more than other people, and you start to see trends, and clearly we were seeing that trend and watching it very closely, and then, again, made the very difficult decision. But yeah, we're not going to talk about specific hardware problems - they're very technical in nature, very complicated, and it's really not going to do us any good.

All people should focus on is that, if you've got the problem, we're going to take care of you.

No. You take a reserve. You have to do it because it's the right thing to do for customers, regardless of what impact that has.

You don't - there is nothing to do with any pricing. All of a sudden you don't say that's a billion dollars you could have given back to the consumer in pricing, no. That has to be done separately, and without getting into generally accepted account procedures, yeah, you've got this - it's a balance-sheet thing you have to focus on, whereas your pricing is another thing.

We're continuing to accelerate our cost-reduction curve - we're continuing to improve on our costs in the hardware - so that ultimately, as we all know, the next few years we can start bringing our prices down in line with where we need to be. Those two things should not be confused, and the consumer should not think they can't afford to bring the price down.