March 28, 2005

The New Sony PSP Handheld: a Clear Victory of Form Over Function

Sony’s New PSP – Introduced, then Withdrawn
Sony's innovative new PSP (PlayStation Portable) gaming and media handheld - aka, "the iPod killer" - was introduced last Thursday, and then... today (Monday 28 March) it was ordered withdrawn.

Immersion Corp., a San Jose company who, in a 2002 lawsuit, accused Sony of patent infringement with the Dual Shock controller for the PlayStation and PlayStation2. Dual Shock technology makes the controller shake in rhythm with what's going on in the game. Sony denies that Dual Shock violates Immersion's patents and, while the district court decision included an order to suspend PlayStation sales, that order does not hold while an appeal is being heard so Sony will continue to sell its game machines in the United States.

But the bigger question may be, will anybody buy this thing? The PSP faces tough competition from the Nintendo DS as it sparks a battle for the $4.5 billion global handheld entertainment market, just at a time when Sony's in the midst of a pitched internal battle to get back on its feet after product successes fell short. Then, the PSP launches as more of a legacy product than anything - c'mon guys, the Memory Stick is a big failure and your failure to use non-proprietary technology standards will lead to the ultimate failure of the consumer electronics business in the long-run! I cannot believe you people can't see this!?! Simply stunning. Anyways, Red Herring broke it down for us on how the competitive battle lines are drawn:

    The PSP’s unique features are console-quality graphics, a 24-title movie lineup, Wi-Fi capabilities, and the amalgamation of games, music, and movies in one gadget. Sony is expected to ship at least 3.7 million units to North America during 2005, according to research firm IDC.

    Nintendo, so far, has been the leader in the portable gaming market with the GameBoy Advance and, more recently, the $150 Nintendo DS. The $250 PSP is the “first legitimate competitor to Nintendo’s dominance” in the handheld market, said IDC analyst Shelly Olhava. Other competitors in the market are Nokia’s Ngage portable and Gizmondo Europe’s portable.

    David Cole, an analyst with DFC Intelligence, thinks that the PSP could become a long-term product and build a base for Sony for several years. “[Sony] is so strong in the game industry, it should do very well,” said Mr. Cole. “It really satisfies the need of the portable audience.”

    The target audience for the PSP is adults between the ages of 18 to 34 rather than the younger audience gaming companies usually target. Nintendo, on the other hand, is more popular with the younger audience. “I think Sony decided that’s where they were really strong,” said Mr. Cole.

    The PSP is a black gadget weighing just under 10 ounces with a 4.3-inch widescreen and high-resolution TFT display. It also has digital photo display and supports digital music playback in MP3 and ATRAC formats.

    The processor is a high-capacity Universal Media Disk (UMD), which is an optical medium enabling feature films and high-quality games to be played on the portable. The 60-mm disk has a storage capability of 1.8 GB. This format will be utilized across the Sony family of products and is available for outside hardware makers and non-game entertainment content providers to use.

    The portable gaming market worldwide was about $4.5 billion in 2004 and is expected to grow to $9 billion in 2009, according to DFC Intelligence. The PSP first launched in Japan on December 12 and has sold 1.18 million units there so far.

    Mr. Cole expects the PSP to get a better reception in North America, where Sony plans to ship 1 million units for the launch. Company officials said that most U.S. stores are on their third and fourth waiting lists for the PSP. “The Japan market hasn’t been doing very well in general. Any product tends to do better [in the U.S.],” he said.

    European launch uncertain

    Analysts are expecting long lines outside stores on the night of the launch in North America. The demand for the PSP has reached such a peak that its European launch, which was scheduled for March 31, could take several more months.

    Ms. Olhava said Sony hasn’t been able to handle shipments because of logistical problems. “I have heard that Sony has manufacturing issues,” she said. “It’s a brand-new product and it’s bound to have some hiccups along the way.

    One problem could be the $250 price. “It’s an unproven price point and that will be a real challenge,” said Mr. Cole. Early adopters are price-insensitive, he said, but consumers will get tighter with their wallet after the first 1 million sales.

    The Nintendo DS has already launched in the three major markets—North America, Europe, and Japan. The DS, which launched in North America on November 21, sold 1.5 million units by February. Company officials have said that Nintendo plans to ship 6 million DS units globally by the end of March.

    Analysts feel the 2005 holiday season and the software availability will determine which portable product succeeds. “Both the DS and PSP are excellent portable systems,” said Mr. Cole. “You really will be able to get the analysis going into the holiday season.”

Meanwhile, every review I've read of the device itself leaves me wondering if it's worth the trouble. Jim Louderback has a few backhanded compliments in that regard, "it's going to redefine handheld gaming. But it's not going to be as popular or as successful as everyone claims. If Sony's expecting an iPod killer, this isn't it. Here's what I see as the good and the not-so-good in Sony's latest platform." More of his review is excerpted below:

    Screen: A standout display, for sure. It's big, wide, and captivating. Colors are rich and detailed. Response rates seemed superb while I was playing Ridge Racer. But there's a downside to all those pulsating pixels, too. First, Sony opted for a very reflective coating. This makes the image look great, but also turns the screen into a mirror in bright light. Even in lower light, the reflections can become annoying in some situations. Don't plan on taking it hiking; this is not a player for the great outdoors.

    Graphics: Far better than the competition's, the graphics engine made the smallish screen look much bigger. Although some of the early titles probably won't take advantage of all the power, Ridge Racer at least looked fantastic.

    Sound: I have no complaints here. The audio quality was simply stunning on my tests, especially when paired with high-quality headphones. The built in speakers are weak and tinny, as you can imagine, but the top-notch audio—when combined with the zippy screen—creates a truly immersive gaming experience on the go.

    Controls: The PSP includes the standard complement of PlayStation 2 controls—although it has only one joystick and one pair of shoulder buttons—and pads that are reasonably easy to use. It has no touch screen, unlike the Nintendo DS, but includes a real portable-gaming breakthrough: a tiny round nub that appears to be the twisted progeny of a joystick and the IBM TrackPoint mouse replacement. Instead of having to be yanked back and forth, this "pointing pad" glides almost effortlessly across a small part of the PSP's surface. It provided a perfect stand-in for a steering wheel in Ridge Racer, and it'll probably become the controller of choice for all but the most precise and demanding tasks.

    Games: The PSP's launch library is good for a new platform, with about two dozen titles available now. Over time, expect to see PS2 retreads and brand extensions galore. But those titles will only reinforce one of the PSP's problems: It's a portable version of a home console, but nothing more. The Nintendo DS, with a touch screen, microphone, and unique dual-screen design, offers more potential for breakthrough styles of portable gaming that don't rely on the archetypes established by console games.

    Just because you build it, however, doesn't mean they'll come. Even though the DS has been out for four months, only a paltry number of titles are available, and few take much advantage of the unique DS features. The DS has one ace card: It's compatible with the huge library of Game Boy Advance titles too, which makes it a better upgrade for existing Nintendo handheld customers.

    Movies: The PSP has also been widely touted as a portable movie player. The device includes a new optical disc format, called UMD (for Universal Media Disc). Each disc is about twice the size of a quarter, and can hold an entire movie. In fact, the first million PSPs here in the U.S. will come bundled with Spider-Man 2 on UMD. Sony's penchant for launching unsuccessful proprietary media formats is legendary (witness Beta, Memory Stick, etc.), and I believe UMD as a broad media storage technology will fail here, too.

    Why? First, because it's highly unlikely that many users will purchase movies in a format that works only on portable players—and no one will replace their home DVD player to go with UMDs. Movie availability is likely to be limited to Sony's back catalog and a smattering of other titles at first, so there won't be much to watch. What about rentals? The picture is murky there, too. Shernaz Daver, from Netflix, said that the company "will support any format as long as it becomes popular," but wasn't ready to commit at launch.

    The big bugaboo here is that you can't make your own discs. And if Junior can't drop Letterman or the X Games onto a disc at night and watch it the next day, then the idea that any significant number of people are going to buy the PSP to watch videos is moot.

    About five years ago, a company called Data Play released a nifty new quarter-sized optical media format. It was recordable, tiny and promised a revolution in media players. But before Data Play could get it to market, tiny hard-drive and flash-based players took off. Data Play sunk without a trace, and even though Sony has far bigger resources to bring to bear, UMD will too.

    Oh, one other fundamental drawback for the PSP as a movie and video player: It lacks a kickstand or other way to keep it upright. Playing games is interactive; you want to hold the player while you frag. Watching video is passive and, based on my experience with first-generation portable video systems from Archos and Creative, if it doesn't stand on its own, it just isn't worth carrying.

    Music: The PSP has the potential to be a great music player, but unfortunately it relies on a flash-based Memory Stick to store music. The system comes with a 32MB Memory Stick, enough for an hour or so of very compressed music—if you didn't have to share the Memory Stick with saved games. But even if you also picked up a 1GB Memory Stick—for an additional $130—you still wouldn't have enough space for music. I frequently hear iPod Mini users complain that even 4GB isn't enough for them. Sure, you can pick up a 4GB Memory Stick, if you've got a spare $500 lying around. I suggest a Creative Zen Xtra or Apple iPod instead.

    In a pinch, the PSP can stand in as a music player. But until you can load 10GB or more onto the system—without spending as much on the memory card as you would on a brand new iPod—few people will use it as their primary music player. To support music and movies, Sony will have to add a mini-hard drive to the PSP, which will only make it heavier and more power-hungry.

    Battery Life: Speaking of power, Sony claims you can get six hours of hard-core game play or movie playback on a single charge. If the PSP delivers on that promise, that's good. Based on my own experience with battery-powered devices, though, you're better off cutting that number in half. Even three hours of game play or movie watching is pretty good, except when your batteries cut out during a long flight or a boring class. Better pack a spare battery or two.

    Price: $250 for a game-playing, movie-watching, music-playing device is pretty darn good, especially for one with a screen as beautiful as the PSP's. It must cost them more than that to make each one, which means they intend to profit on the games and the movies, instead.

    To justify that price, though, the PSP will have to do more than just play games, as Nintendo's offerings cost half as much or less. Many hard-core gamers will certainly pony up, but the jury is out on whether enough casual gamers will adopt it to make it a success. My best guess is no.

    Connectivity: Like the DS, the PSP will ship with built-in wireless networking. That's great for group gaming, but why is there no built-in Web browser or e-mail client? And no way to connect your PSP to your PC wirelessly to transfer music and movies to the Memory Stick? All the parts are there, but the whole is sadly lacking. I, for one, would love to see Skype for the PSP—that would have been a real breakthrough!

    Reliability: This is the great unknown:. How well will the PSP hold up to months and years of heavy playing and portable jostling? I'm not particularly bullish, especially because that large screen is unprotected. Sure, the PSP comes with a slip-on foam case, but it's so nondescript that I almost lost it five times in one week. In just a few short months, a scratched screen will take much of the luster off of the PSP.

    The Nintendo DS's clamshell design makes it much more likely to survive years on the road, especially in the backpacks of all those hyperactive kids and one clumsy journalist. I was almost scared to travel with the fragile-seeming PSP, particularly because we only had one in the entire company.

    And how long will the battery last? Regular gamers will probably need a new one every year or so, which creates a tremendous after-market opportunity.

    Finally, what about the internal software? Is it robust enough for all the banging—and hacking—that's bound to go on? Will it need regular flash updates? And how do you distribute a flash update to the PSP if you don't have a wireless network? Via UMD? Memory Stick? I don't know about you, but I certainly don't have a memory stick reader for my PC. Fortunately there's also a standard USB 2.0 port. Perhaps you'll download updates off the Web site and send them to the PSP via this port.

    All in all, I think the PSP will be extremely popular among hard-core gamers, especially those who spend hours each week banging on their PS2s. I wouldn't buy it for kids, though, because it's too fragile. And I think the lack of robust media playback—non-writable UMD, paltry and expensive Memory Stick storage options—make it less than ideal for casual gamers.

    In the end, the PSP excels at just one thing: portable gaming. Casual gamers who already own a satisfactory portable gaming platform, whether it's an old Game Boy Advance or even a game-playing cell phone, have little incentive to switch. And anyone looking for a portable media player that will unseat Apple's iPod needs to keep looking. Because when it comes to everything else, the PSP just doesn't cut it.

And, PC Magazine sums it up even more concisely, a victory of form over function:

    Those in the target demographic have eagerly awaited its arrival. And even people other than 15- to- 25-year-old males may have more than a passing interest in one of the year's most anticipated pieces of gadgetry: the Sony PSP. Originally conceived as the PlayStation Portable (and now simply called the PSP), the slick, gorgeous device succeeds spectacularly as a portable gaming console. If you view its music- and video-playback capabilities as bonus features, you'll be thrilled; if you were hoping it would be best-in-class at all its endeavors, you'll be slightly disappointed.

Clearly breakthrough product innovation can make or break the company that gets it to market; but there must be a compelling customer value-proposition inherent in the product itself, differentiated in the way it is built/sold/positioned, or it must be disruptive to existing markets for there to be a hope for success. It sounds to me like the Sony PSP falls short on all three counts, despite all the hype and lawsuit PR.

- Arik

Posted by Arik Johnson at March 28, 2005 08:51 AM