NEW YORK (CNN/Money ) – In recent weeks, analysts and pundits have filled the air with speculation that Sony would be forced to delay its entry in the handheld gaming market. Today, the company proved 'em wrong – and shocked everyone in the process.
The PSP (aka PlayStation Portable) will hit streets in Japan Dec. 12 with a retail price of just $186. That's significantly less than the $199-$299 analysts were expecting. And it's way less than Atari CEO Bruno Bonnell predicted in June. (Admittedly, Bonnell was tossing a verbal grenade in hopes of getting Sony to start sharing information.)
A sub-$200 price point is a master stroke for Sony – and one that should cause some angst in Nintendo's corporate headquarters. Yes, the Game Boy Advance is significantly cheaper at $79. And the forthcoming Nintendo DS (dual screen) handheld system will retail for just $149. But the PSP will offer (eventually) digital music and movies in addition to games. And it's launching at a price point that's close enough to Nintendo's machines that consumers could be swayed to spend a bit more for the additional functionality.
With an on-time Japan launch confirmed, the question of a timely U.S. launch looms large, however. Sony, which originally planned for a simultaneous worldwide launch of the PSP, insists the device will be on U.S. shelves by the end of March 2005. Analysts and publishers remain skeptical.
"We do not expect the PSP to be shipped until the June or more likely September quarter next year in the U.S.," wrote Banc of America Securities analyst Gary Cooper in a research note Wednesday.
Cooper's comments echo those made by Activision CEO Bobby Kotick in August.
Sony will only ship 200,000 PSPs in Japan at launch, though it hopes to bump that to 500,000 by year's end. That's a fairly small number of units. That might be due to supply issues, but it could be a smart business move.
|Sony's PSP will launch in Japan for $186.
"I think it might be in Sony's best interest to make sure there's a scarcity element to this launch," said John Taylor, an analyst with Arcadia Research. "The last thing anybody wants is for the product to be overshipped and undersold. By putting it out in limited batches, particularly to a gadget-hungry audience, I think they protect themselves and dramatically improve the perception that this is going to be one of the hot products of next year."
Regardless of whether the PSP makes its U.S. launch date, the system will arrive with momentum on its side. Traditionally, when Sony has launched hardware in Japan, it offers a moderate price reduction when it brings the device overseas. When the PlayStation 2 launched in Japan, for example, it carried a price tag equivalent to $360-$370. When the PS2 hit U.S. shores seven months later, it sold for $299.
So, could Sony plan to launch the PSP in North America for as low as $150? It's certainly possible – especially if the system does get delayed. If it does launch for under $150, expect the gaming world to go into a feeding frenzy.
"The pricing decision is going to depend on what features get delivered in a high quality way," said Taylor. "If the product delivers a really high quality video and audio experience, then I don't think they need to drop down to the DS [price] level. If, on the other hand, it's going to be just a game machine, I think they'd be well advised to drop the price."
The PSP's Japan launch will be accompanied by 12 games, the same number of titles the PS2 launched with. Sony vows to have 21 games available for the PSP by the end of the year.
A good number of those won't make it to the North American market, since cultural tastes differ significantly. Developers and publishers such as Activision (Research) and Electronic Arts (Research) are working to get additional titles ready for the system's launch in this market, however.
The PSP needs a "killer app" though – a must-have game that will convince gamers they need to buy the machine. EA's Madden series, a virtual certainty, could pull in a wide audience, but it's Take Two Interactive Software (Research) that everybody's watching. The company has committed to building for the PSP – and a portable "Grand Theft Auto" (thought to be underway) could tip fence-sitters over the edge.
Taylor's concerns about the PSP's movie and music functions are well placed. So far, Sony hasn't talked much about those aspects, mainly because the standard for how data will be transferred to the PSP's new disc format hasn't yet been finalized. As such, Sony today said it would not announce a movie lineup or the availability of any music download service for several months.
Wouldn't it be convenient if it gets those details worked out in time for the U.S. launch?
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Sony (Research) is a company that likes to win – and win decisively. While it has sworn to anyone who will listen it's not setting its goals for the PSP based on any success Nintendo has had in the handheld market, don't believe for a moment that the company isn't hoping to knock Big-N to number two.
It has some hurdles to overcome – lingering questions about the PSP's battery life and Nintendo's well-entrenched position in this segment of the industry top the list – but with Wednesday's announcement of a surprisingly low price, Sony has made it clear that the gloves are off.
Morris is Director of Content Development at CNN/Money. Click here to send him an email.