The king of gaming consoles wants you to play games, watch movies—and sing along, too.

February 3, 2005

The battle for the portable video gaming market will heat up on March 24, when Sony launches its long-awaited PlayStation Portable (PSP) in North America. But the Japanese company isn’t just going for gamers this time—in a bid to conquer the multimedia player market, it also is trying to expand the PlayStation’s reach to movie watchers and music listeners.

That plan sets it apart from its archrival in the gaming business, Nintendo, which has remained faithful to its roots. “Sony is trying to find its next Walkman,” said Jay Horwitz, a market research analyst at Jupiter Research. “It remains to be seen whether their formula is better than Ninendo’s.”

The first set of consumers for the PSP will be hardcore gamers, said analysts. Sony has lined up 24 new titles that will start at $40, including Need for Speed Rivals and Metal Gear Acid. If the PSP’s performance in Japan is any indication—since debuting there on December 12, Sony has shipped 800,000 PSP units—Sony will have no trouble attracting a sizable percentage of the 23 million-plus portable game players in the U.S.

Jupiter Research projects that the number of portable game players in the U.S. will grow from 23 million in 2003 to 43 million in 2009, and revenues from portable gaming devices, and games themselves, are expected to increase from $1.6 billion in 2003 to $2.7 billion in 2009.

“We see it as an opportunity to bring handheld entertainment to new people,” said Janette Barrios, a spokesperson for Sony Computer Entertainment America. But at $250 each, including accessories, Sony’s PSP may be at a disadvantage to its nemesis’ cheaper products, the Nintendo DS and GameBoy.

Nintendo of America spokeswoman Beth Llewelyn noted that the company has sold 1.4 million DS units in the U.S. since its launch last November. DS features two screens, one of them a touch screen, and voice recognition technology. And at $150, DS is more affordable. The venerable GameBoy, first introduced in 1989, costs $79. “If you are looking at the handheld landscape, we are in a strong position,” said Ms. Llewelyn.

Although Nintendo offers the price advantage for now, it won’t be long before Sony can slash the PSP price to heat up the competition, said Tim Bajarin, president of consultancy Creative Strategies. “What [Nintendo has] to worry about is that over time, the PSP will break that $99 price point,” said Mr. Bajarin. He gives Sony 18 to 24 months to bring the price down.

Sony hopes the PSP will appeal to older gamers—from teenagers all the way to thirty-somethings. Its multimedia features should make the PSP more enticing to the affluent and sophisticated crowd, who may not be put off the high price. “Sony is going to dent the market, but the market will get bigger,” said Michael Pachter, an equity analyst at Wedbush Morgan Securities.

Mr. Pachter also sees PSP as a way for Sony to prepare consumers for new multimedia products it plans to introduce later. By training people to think of Sony when they want to buy music and video players, the company can more easily sell new electronic gadgets that will sit in customers’ living rooms, he said. Sony denied any long-term multimedia gadget plans.

To compete with a growing list of competitors, Sony may have to continue to innovate in the handheld multimedia market in the future. Nokia, for example, has the N-Gage, a combination phone, music player, and gaming system. But for now, with its PlayStation2 leading in the rumpus room, Sony doesn’t seem too worried about winning big in the portable market.