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Sony Gears Up for U.S. PlayStation Portable Launch


LOS ANGELES (Reuters) - There is no doubt that Sony Corp. will have a hit on its hands in the PlayStation Portable video game and media player which launches next week -- and there is no doubt the industry needs it.

Demand is so high for the PSP in the United States that the unit has become virtually unavailable in Japan and Sony has postponed the European launch by months to boost U.S. supply. The paperback-book sized unit launches March 24 in North America.

"It's all about how many of these devices Sony can actually crank out," said Mark Argento, a games analyst at ThinkEquity Partners.

Sony is counting on the PSP for much more than its gaming capabilities. In addition to games, the PSP plays movies and digital music files and also acts as a photo viewer. It could be Sony's best chance yet to challenge the ever-increasing dominance of Apple Computer Inc.'s iPod digital music players.

"There have been so many developers, especially in Japan, that view the PSP as a lifestyle device," said Ricardo Torres, a senior editor at leading video gaming Web site

"I don't necessarily think it's going to destroy the iPod, but there's no reason why it wouldn't be one of the devices you bring with it now."

Foremost, though, the PSP is for video games, and its release could not have come at a better time for the $10 billion U.S. video game industry.

Handheld games -- for the PSP as well as Nintendo Co. Ltd.'s Game Boy Advance SP and DS -- are expected to be the primary driver of U.S. software sales this year. Analysts expect sales to be flat to up 5 percent.

The impending release of the PSP has helped cheer video game stocks. For the year to date, shares in THQ Inc. are up 26 percent, Take-Two Interactive Software Inc. shares are up 17 percent, Activision Inc. shares are up 15 percent and Electronic Arts Inc. shares are up 8 percent. In comparison, the Nasdaq is down 7 percent.

"The bigger question is if (Sony) can get 4-5 million of these units in North America by the end of this year; assuming an attach ratio of two to three games ... to the publishers you're looking at $400-600 million in revenue," Argento said, assuming a wholesale price of about $30 for the games.

The $250 "Value Pack" that goes on sale in the U.S. next week includes the PSP, accessories and the movie "Spider-Man 2" on UMD. That new format, with the capacity of three CDs, was developed especially for the PSP.

In January, Sony said it had no plans for UMD movies in the months after the PSP launch. But it changed track just a month later, as Sony Pictures announced a full slate of films for the tiny new discs.

Both Walt Disney Co. and Lions Gate Entertainment Corp. have committed to UMD releases.

There is so much anticipation for the PSP that some people are willing to pay importers more than $100 above the planned U.S. list price to get a Japanese unit.

"In the past few weeks, import PSP sales have been leveling off, but not by as much as we had expected this close to the USA release date," said Peter Mui, owner of video game importer National Console Support, in an e-mail interview.

Since 1989, Nintendo has controlled the handheld video game market with its Game Boy line. The more expensive DS, released last year, has two screens, one of which is touch sensitive, and has been cited as a model of creativity.

But it lacks many of the PSP's media functions, and Nintendo executives are not taking Sony lightly.

"We are not dismissing this in any way, shape or form," said Reggie Fils-Amie, Nintendo of America's executive vice president of sales and marketing, said in a recent interview. He suggested consumers would prefer the DS because at $150 it is more affordable than the PSP and is Game Boy compatible.

But the industry says the two machines are in different leagues.

"I don't think you should discount Nintendo, but I definitely think any kind of head to head comparison between the two machines is not even worth doing," Torres said.

Read our full review of the Sony PSP

Copyright © 2005 Ziff Davis Media Inc. All Rights Reserved. Originally appearing in PC Magazine.

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