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PSP no one-trick pony

Sony's slick gaming machine hits the North American market this week. Will it conquer? Photos: PSP heads stateside

The battle for the digital living room is still far from settled, but Sony is betting it can take over your backpack or purse in the meantime.

The company's PlayStation Portable, which goes on sale in North America on Thursday, could be one of the first limited-scale victories for "," the oft-touted notion of combining numerous media functions into a single device.

While convergence in the home is still an idea looking for a market, the concept has a better chance with portable gadgets, where a multifunction approach can save valuable pocket space.


What's new:
While the PSP is mainly being touted as a portable game machine, Sony is positioning the device as something different and better--a multimedia player that can be used for lots more than games.

Bottom line:
Next in the lineup of gotta-have gadgets, analysts say, is a portable digital-media player that taps games, video, music and more. Will the PSP give Sony a head start in the next phase of the digital-media era?

More stories on the PSP

The PSP takes a new path in the quest for an all-in-one gadget. It's being sold primarily as a portable game machine, a market where it can capitalize on the huge PlayStation brand, yet it can also play movies and music, display digital photos and potentially perform a host of Internet tasks through its built-in wireless networking. The result, analysts and industry observers say, isn't the "iPod killer" many have imagined, but a device that could give Sony a head start in the next phase of the digital-media era.

"The next evolution on top of the iPod is the digital-media player, a device that plays multiple forms of content, and the PSP could really establish that market," said Michael Goodman, an analyst for research company The Yankee Group. "The PSP is going to make or break itself in the next six to 12 months as a game platform. But it's also a Trojan horse for portable video and audio and images. Once you get it in people's hands as a game player, they see it has all these other great capabilities."

Games have dominated plans for the PSP since Sony announced the device last year, but recent developments have been at least as focused on other functions. Sony decided to introduce the device in North America as part of a package that includes a copy of the Sony Pictures film "Spider-Man 2" on the new Universal Media Disc, or UMD, format the PSP will use. Other movie studios, including media giant Disney, have also recently announced support for UMD.

No music labels have revealed plans yet to support UMD, but a Sony executive recently confirmed that the company plans to release software updates that will use the PSP's built-in wireless networking capability to download tunes from Sony's Connect store and possibly other services.

PSP gallery

Future expansions could include support for many WiFi-powered Web functions, from basic e-mail and Web browsing to connecting to live TV programming. With the market for handheld computers dwindling, the PSP could become just enough of an organizer for the average person, according to Goodman.

"You can see a lot of different kinds of potential applications you could layer on to it," he said. "Once you have the connectivity, it opens a whole host of possibilities."

Not all fun and games
Such multimedia capabilities make sense from several standpoints, said David Cole, president of researcher DFC Intelligence, including the competitive landscape. Nintendo has virtually owned the portable gaming market for years. By cramming in more capabilities than Nintendo put on the new DS, Sony hopes it can appeal to a broader demographic and command a slight price premium, Cole said.

"They figure they've got the game component down; now they want to position it as something different and better, and it seems to be working," Cole said. "Whether the extra features are used a lot or not, it still puts them in a nice position for helping consumers justify the purchase."

Michael Cai, an analyst for research company Parks Associates, noted that a slew of would-be GameBoy killers have over the past decade been trying to steal away part of the device's preteen audience. Sony is smart to aim for an older, more discriminating class of customer, he said.

"There a lot of corpses in the GameBoy's wake," he said. "What Sony is betting on is expanding the demographic to 18- to 24-year-olds or even 24- to 39-year-olds," he said. "These are people that have played a lot of console games and they have bigger expectations for graphics and other parts of the experience. Sony is really trying to wow them with how good this looks."

Sony executives maintain that the PSP isn't even playing in the same league as Nintendo. "We think it would be selling the PSP short to begin and end the comparisons" with Nintendo, Jack Tretton, executive vice president for Sony Computer Entertainment America, told CNET News.com last month. "The PSP brings a lot more to this space. We really see this as a 21st century convergent multimedia entertainment device."

Selling the PSP as a multimedia gadget also makes sense from a corporate standpoint. Sony largely missed out on the first wave of digital-music players, thanks to its insistence on proprietary formats, but the market for portable video players is still largely untapped. The PSP could jump-start the category, Goodman said, by shifting the initial focus to a function consumers already have embraced--gaming on the go.

"To date, the portable media player market hasn't really taken off," Goodman said. "Video is a very difficult thing to do as a lead product in a portable device...The PSP gets into those multimedia categories, but it has a very different lead application, and it has a tremendously strong brand."

Even game publishers are supporting the push to highlight non-game functions in the PSP. Most PSP titles from leading publisher Electronic Arts will include "Pocket Trax," a music feature that lets players customize game sound tracks and view music videos. James McDermott, worldwide product manager for EA's PSP business, said such functions take advantage of the growing connections between the game, music and film industries.

Achilles' heels
"We've seen from our research that people want multimedia functions from our games," McDermott said. "We're thinking more and more in terms of providing entertainment packages."

Likely weak spots in Sony's efforts to establish the PSP as a multimedia gadget include storage. The only recordable media the device will accept are flash memory cards in Sony's Memory Stick format, which currently top out at 1GB. That's enough to haul around a few albums' worth of music, but not enough to compete with hard drive-based audio and video players.

"I think storage is the weak link in the ecosystem," Yankee Group's Goodman said. "For a lot of these things they may be considering, storage becomes the limitation."

Sony's reliance on yet another proprietary media format is also likely to mute enthusiasm. For now, the only way to get commercial video content on the PSP is to buy a $20 UMD version of a movie you may already have on DVD, a prospect unlikely to appeal to consumers.

"The biggest inhibitor for portable video is access to legal content," said Michael Gartenberg, an analyst with Jupiter Research. "PSP is going to have that, but it's going to be in a proprietary format that can't be played on any other device."

Cai agreed that UMD movies may be a tough sell. "Persuading people to spend another $20 for a UMD disc is going to be tough," Cai said. "The DVD format is so easy to play anywhere--home, car, traveling with a laptop or portable DVD player. I think it's going to be a big challenge for Sony to convince people they need something in addition to that."

Acceptance of the PSP as a portable video player may have to wait until Netflix or Blockbuster start renting movies on UMD or until Sony introduces ways of getting other types of programming on the device. Starting next month, consumers in Japan will be able to buy a new version of the PSX, Sony's PlayStation 2/video recorder hybrid, which can record TV shows in the MPEG-4 format used by the PSP and load them onto a Memory Stick.

Similar features could show up in the PlayStation 3, Cole said. "I'd expect to see a lot of features in the PS3 to cooperate with PSP," he said. "That's where it gets a lot more exciting to have these capabilities in the PSP."

Wireless connections could also offer new ways to get content onto the PSP, Cai said. "Real-time TV could be distributed pretty easily that way, and that would be pretty compelling," he said.

For now, though, the PSP is mainly a game machine, which is what Sony needs to emphasize as it gets the first few million units in consumers' hands, Gartenberg said.

"What we're seeing here is the first iteration of a mobile entertainment strategy that's going to be focused on games for now," he said. "This is the first move in a very long game."