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The challenge that the PSP faces is one of
content and distribution. As handheld rivals such as the iPhone and iPod Touch
start nibbling away at the edges of the PSP's market, Sony has to change its
route-to-market or risk a steady erosion of players.
That's not to say that the iPhone is a better
gaming platform -- far from it. I completely understand the perspective of
those who believe that a dedicated gaming device like the PSP will always
outperform the iPhone.
But we're not just talking about gaming performance.
We're talking about the ease-of-use of getting hold of, and paying for,
software.
And on this score the iPhone with its integrated AppStore and
seamless purchasing process wins hands-down. The average iPhone user has
downloaded 27 apps (not necessarily games);
the tie ratio for the PSP is 4.2.
Obviously, many of iPhone apps are free or have
very low prices, compared with $19.99 USD or more on PSP.
But that is only part
of the story, since the revenue from the PSP is split between the retailer, the
cost of the UMD, the physical distribution, Sony's cut and the
developer/publisher royalty. On the iPhone, it's a simpler 70:30 split in favor
of the developer.
So Sony needs to embrace digital distribution for
the PSP (all the signs are that they are going this way), reduce barriers to
entry for developers/publishers, and encourage the reduction in price of games.
The PSP remains a better gaming device than the iPhone -- the challenge is to
make sure it stays a more profitable gaming device for developers, publishers
and, ultimately, Sony.
Do you have a business-related question about the
video game industry that you would like to suggest for discussion in Analyze
This? Are you a professional analyst and would like to take part in this
column? Email howardhwen@gmail.com.
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Nicholas Lovell, 
