Forrester: Sony wakes up

Paul Jackson and Jaap Favier at Forrester Research contribute a special commentary on Sony's recent announcements at CNET News.com. The first announcement was about the PS3 delay and the second was about enhancements to the Sony PSP line.

Jackson and Favier state "this is the first sign that Sony is watching what its competitors are doing and responding accordingly. If it can live up to these promises, Sony's success will guarantee its continued dominance in home consoles and will significantly increase its market share in the portable console space." Here are their PSP related points:

• The PlayStation Portable will become a true network appliance. In addition to announcing a price reduction on the PSP to $199 that kicks in March 22, Sony also announced that it will support video VoIP (voice over Internet Protocol) phone calls by October--utilizing an EyeToy-like add-on camera and, presumably, Sony's Instant Video Everywhere technology. Sony also announced support for a future GPS module and RSS feeds. This means that the PSP moves from being a so-so Web browsing device to a full-fledged network appliance.
• Sony's online strategy is starting to emerge. Microsoft has made much of the success of downloadable games on Xbox Live Marketplace, and Nintendo's strategy for the Revolution centers on downloadable back-catalog games. But Sony had been silent on its plans for digital distribution of content--until now. Now, not only will the PSP support the downloading of more casual Flash-based games, but it will also play downloaded PSOne titles via an emulator. While business model and game storage questions remain, this represents a step in the right direction for Sony--and leaves us eagerly awaiting details of the online services it will offer for the PS3.

Jackson and Favier believe "Sony remains in the driver's seat--for now. After a period of damaging uncertainty, Sony has reclaimed the initiative with these announcements." As a result they think:

• Reducing the price and increasing the gaming and communications capabilities of the PSP will boost sales and answer critics who point to poor sales of Universal Media Disc (UMD) movies as an indicator of the failure of the device's nongame functions. (UMD is the optical media format used by the PSP.)
• Digital distribution will hit the mainstream. This time last year, the digital distribution of game software seemed a distant dream: Retailers had a strong hold on consumers' wallets, content producers were paranoid about piracy, and platform owners were reluctant to support network services. But now we have seen the successful digital distribution of PC games like "World of Warcraft" and the launch of casual download services, such as GameTap and Xbox 360 Live Marketplace, that have sold thousands of copies of games. We've also witnessed digital distribution announcements from both Sony and Nintendo. Thus, this year will be the one in which digital distribution starts to become a viable business model for the video game industry.

Until the PSP gets better text entry capabilities, I wouldn't go so far as saying it will be a full-fledged network appliance. As for the fate of the UMD for movies, just reducing the price of the device isn't going to help sales of the floundering format. They need to drop the price of the content, find a better way to get the content onto the big screen, and/or value package UMDs and DVD at the point of sale.

Do I really want to own two copies of the same movie? If I have a choice then buying it on DVD and then tranferring a copy to the MemoryStick Pro Duo is more palatable then owning a UMD disc that can only be played back on the PSP...