'Plus plus plus plus plus plus!" That, according to Ken Kutaragi, is the videogame business. The smiling, dapper president of Sony Computer Entertainment Inc (SCEI) is talking, in his charmingly idiosyncratic way, about the future. We are in SCEI's Tokyo headquarters, a few days after this season's surprisingly high-quality Tokyo Game Show. And Kutaragi is determined to prove that his baby, the PlayStation 2, can withstand the threat of new competition from Nintendo and Microsoft.

"I heard about these new consoles, yes," says the 51-year-old visionary, known affectionately as Ken-san, who engineered both PlayStations. "We welcome them. But the new person from Seattle, and our old friend Nintendo, they have different concepts. The newcomer from Seattle, the computer is their core competence. Their components and concept are almost PCs. Nintendo? Talented, nice entertainment. Mario, and so on. They are attracting a young audience first. But we are creating content, pioneering a new market."

Kutaragi is especially encouraged by the fact that, finally, software of high technical quality and aesthetic invention, such as the beautiful in-house adventure ICO, is appearing on PlayStation 2. Not that he worries whether videogames are art or not. "Art? Yes, very nice. But we are in the entertainment business. Maybe some creators can express their artistic concepts through our form of entertainment. But we are a product." Nevertheless, Kutaragi's product is only as good as the entertainment that comes with it. And to that extent he is candidly apologetic about the length of time it has taken developers to get their heads round the PlayStation 2's unusual internal architecture.

"Yes, the parallel architecture is very deep, but difficult. We should have made it easier for content creators in the beginning," he admits. "With PS1, a nice platform, they ran everything on the metal. Now, a very clever person can perhaps catch up with PS2 in several months. A top publisher can get to grips with it and find out the secrets we have put in there. But newcomers who only have experience with PCs - they're very different, only one processor. It took them two years. But now it's very nice, developers are getting very high performance out of PS2."

There have been rumours flying around recently that Sony has plans to enter the handheld market. Any truth in that? "Well, the Gameboy Advance... very very nice, but the display quality is not attractive enough," Kutaragi says, with a sad smile. (Nintendo has come in for much criticism from gamers disappointed with the GBA's extremely dark LCD screen, and has recently switched screen providers.) "Nice concept, nice content. But using current technology, it is difficult." Sony is interested in developing a handheld, he confirms, but it has to wait - "maybe two, three years from now" - for low power-consumption semiconductors and better screen technology. To illustrate the latter point, Kutaragi picks up a PS1 with Sony's new portable LCD screen attached. "This is brighter than many CRT monitors," he says proudly. "And it's very fast. It can display 60-frames-per-second animations. The Gameboy Advance screen is very, very slow."

But Kutaragi doesn't really want to talk about future Sony products, especially not about a PlayStation 3, even though he is doubtless hard at work designing that machine's circuitry right now. For now he is concentrating on selling the PlayStation 2's online capabilities. "Next year we will be connecting as many PS2s as possible to the network," he says. This strategy is not about mere competitive online gaming, but content distribution. Eventually, Sony wants to deliver content to you over its own portal. Movies, music, games, the whole shebang.

For the moment, though, as Kutaragi is at pains to point out, traditional channels are not going anywhere. "Our primary medium is still CD-Rom and DVD-Rom," Kutaragi insists. "They are not going to disappear. They are the most efficient distribution medium. Very nice, very cheap, established infrastructure. Eventually we want to enhance the bandwidth to the level of HDTV, but that is not possible right now. Even so, we can do nice things with 8 megabits per second." The "nice things" go beyond simple ping gaming, where you and I compete in a fragging tournament or driving game over the internet. They include ideas such as being able to download new cars into Gran Turismo 3 as soon as the manufacturers announce new models.

But hang on. All this talk of networked PlayStation 2, with USB keyboards and mice - isn't Kutaragi trying to turn the console into a PC? "I don't think of this product as a PC," he insists. "It's like a TV. PC, yes, nice tools for creators, but this is pleasure. Like a mobile telephone. It should be convenient and robust. Your grandfather should be able to use it."

And what about the simple fact that videogame console peripherals have always failed in the past? How is Sony going to make its consumers want to buy the broadband adapter for their PS2? Kutaragi tries to wriggle out of the question by insisting that the adapter "is not a peripheral", simply because it fits flush into the machine's main chassis. Er, right.

In fact, what Sony is currently considering is a subscription model, along the lines of satellite TV. You pay a small monthly fee to use the Sony network, and the hard ware is thrown in free. As well as Sony's recent deals with AOL in the US, and Telewest in the UK, and its port of RealPlayer to the PS2, it is working with Japanese company DoCoMo to investigate connectivity with third-generation (3G) mobile phones.

Kutaragi thinks consumers will bite. "Communication is the ultimate entertainment!" he announces. "DVD and CD is nice, but it's still stand-alone entertainment. People want to talk, collaborate with each other. That's why they live in cities, gather in restaurants and bars." To encourage take-up, every in-house Sony game currently under development will have network features built-in.

Perhaps the most intriguing part of Kutaragi's vision for the broadband future is that it will make current excitement about the console wars, and who has what must-have game, irrelevant. "In the future, broadband will connect all appliances - console, TV, phone, PC, everything. Then exclusivity means nothing."

Kutaragi then delivers an astonishingly provocative statement. "The ideal situation is that PS2 can connect to Xbox," he says, with a little smirk. Is this just a coded declaration of contempt for the newcomer from Seattle (not once does Kutaragi pronounce the word Microsoft), a declaration that Xbox couldn't possibly hurt Sony? Kutaragi won't be drawn. "My kids want to connect to their friends," he explains. "Communication is key."

It sounds as if Sony is planning to reposition itself as a content provider first, knowing that its hardware near-monopoly cannot last. Maybe it is a little afraid of Microsoft and Nintendo after all.

On the other hand, Kutaragi finishes in a highly relaxed fashion by chattering about the limited-edition line-up of brightly coloured PlayStation 2s that are launching in Japan in December. Each one has the colour and finish of one of his favourite cars. "Cars are my other hobby," he explains happily. "I have BMW, Mercedes... PlayStation 2 is nice design, but I love cars." These might be testing times for the videogame industry, but Ken Kutaragi doesn't seem like a nervous man.

· Steven Poole travelled to Tokyo as a guest of Sony Computer Entertainment Inc.