Kobayashi-san noted that the biggest challenge for them right now is the Japanese market, which "is shrinking" - it's crucial to be "gaining success" in the US and European marketplace.
"There are so many issues we have to solve, and the biggest challenge is that the market in Japan is shrinking - they key is gaining success in the US and Europe," Kobayashi-san said in his speech to DICE Summit Asia, reports .
"At the time of the original PlayStation the Japanese market was one third of the global market, and production costs weren't that high - so we were able to generate profit from that market alone."
"But now we're in the era of the PlayStation 3, and the Japanese market is only one fifth of the global market - when it comes to production costs, those are swelling, so it means that unless we gain success in the overseas market our studio will go bankrupt. It's a crisis we recognise," he sternly warned.
Sony has been undertaking studies to help understand how to sell traditional Japanese titles better overseas. Box art was a big issue, and can influence sales.
"If the packaging was designed differently, we think it would have sold more - in fact on the internet many people have said that the Japanese version was better," he noted, referring to ICO having sold just 270,000 units in the US. Kobayashi-san then touched on 'new game'.
"It seems the definition of a new title is different in the US and Europe to Japan. It means a new genre, that's what we call a new game," he went on.
"But people in the US especially seem to have a little bit of a different view - if a game has a something that's slightly different, people take it as a new game..."
So team ICO's latest creation is named for our benefit, and presumably for western box art designers. The Last Guardian is exclusively releasing on PlayStation 3.