Sony Nears Unveiling of Next PlayStation Portable

Following four months of speculation, Sony (NYSE: SNE ) appears to be ready to formally announce the PlayStation Portable 2 handheld game device. Online news outlets VG247 and MCV reported Wednesday that the company will hold a “business overview and strategy meeting” in Tokyo on Jan. 27 to cover the formal announcement. While Sony hasn’t officially confirmed the date of the meeting, these reports come just two-and-a-half weeks after Sony Computer Entertainment President Kaz Hirai (rumored to be taking over as Sony CEO in 2011) discussed the handheld gaming device in an article published by The New York Times . Hirai said his company had been planning its latest devoted portable gaming device “since the day” the first PlayStation Portable was released in 2004. The first PSP was billed as a portable game player, but also represented one of the first mainstream efforts to build an overall media device. It supported both downloadable movies, MP3 playback, and home videos sold on Sony’s proprietary disc media (the failed UMD format). This attempt to meld game, movie, and music entertainment on a single platform came three years before Apple (NASDAQ: AAPL ) successfully did it on two platforms, the iPod Touch and iPhone. It’s into that market fostered by Apple’s success, where smartphones running on Microsoft’s (NASDAQ: MSFT ) Windows Phone 7, Google’s (NASDAQ: GOOG ) Android, Research in Motion’s (NASDAQ: RIMM ) BlackBerry OS platforms and many others all run games in addition to multimedia capabilities. Sony also is facing a portable gaming market that has changed dramatically over the past two years, where consumers expect 99-cent casual fare rather the $40, graphics-intensive games typical of the average PSP title. High-end graphics and immersion appear to still be Sony’s focus with its portable gaming strategy, but high-end technology failed to help Sony topple Nintendo’s (PINK: NTDOY ) Nintendo DS handheld device over the past six years. Nintendo, meanwhile, is releasing its own new portable gaming machine this spring, the Nintendo 3DS. The device is similar in form to the current Nintendo but sports greatly improved graphics comparable (and reportedly better than in some cases) to those seen in high-end iPad games like Epic Games’ recently released Infinity Blade . The 3DS’ real hook, however, is that the device is capable of displaying stereoscopic 3D images without the need for special glasses. Sony’s PSP2 is rumored to feature graphical output comparable to what’s seen on high-definition home consoles like Microsoft’s Xbox 360, but it’s questionable whether that will be enough to woo consumers away from alternatives like the iPod Touch and the brand loyalty that come attendant with almost all Nintendo hardware releases. Both Nintendo and Sony’s new gaming devices will face an uphill battle when they’re released later this year. While hardware sales for both the Nintendo DS and PSP have remained brisk these past six years, software sales have steadily declined as Apple’s handheld devices have gained in popularity as gaming hardware. Nintendo has already committed to cartridge-based physical media as the Nintendo 3DS’ software format of choice, and Sony has indicated that the PSP2 will also support some kind of physical media, if not the original PSP’s UMD format. Are consumers willing to buy boxed portable game software at brick-and-mortar retail stores in 2011? We’ll know more in the first half of this year. As of this writing, Anthony John Agnello did not own a position in any of the stocks named here.
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