Sony's PSP: Pretty Sweet Price?

Sony (NYSE: SNE  ) may have delayed the debut of its PlayStation 3 juggernaut, but that doesn't mean the electronics giant has no aces up its sleeve.

That's the great thing about having major franchises in not just one but two arenas. Sony may essentially lead the console market, but it also has a palpable presence on Nintendo's turf -- I'm talking about the PSP handheld wonder, of course. And now, Sony has upped the game concerning that platform.

Looks like those in the market for a shiny new Sony portable device will have a choice. Instead of being forced to shell out $250 for a PSP with a couple of accessories, consumers will now be able to buy just the PSP and the requisite rechargeable battery system for about $200. This is pretty clever, actually, because it sort of feels like it's a price cut when it isn't, exactly. Granted, the case that came with the $250 model might not be so sacrosanct, but users will end up springing for a memory stick and headphones to go along with the lesser-priced PSP.

Nevertheless, this promotion should convert more kids (and more than a fair amount of adults, too) into PSP owners; with Easter around the corner, the fuel is there to pump this scheme up. Not only is that music to Sony's ears, but it's also a merry tune to companies such as Activision (Nasdaq: ATVI  ) and Electronic Arts (Nasdaq: ERTS  ) . We all know that drill by now -- a bigger installed user base equals better shareholder-value prospects for best-in-class software publishers. Plus, movie studios owned by the likes of Time Warner and Lions Gate Entertainment will enjoy increased opportunities to monetize their libraries over the PSP's UMD format -- remember, you can watch movies and listen to music on the system in addition to playing sports and fantasy games.

Perhaps a bigger angle to this pricing tier involves Sony's fight against Microsoft (Nasdaq: MSFT  ) and that company's snazzy Xbox 360 console unit. It's all about choice. A $200 price might persuade some consumers to hook up with a PSP instead of a hard-to-get item that is more expensive. (Microsoft is, however, working to correct the supply/demand imbalance.) If Sony can keep those users enthralled with its hardware, then many of them may indeed bypass the 360 altogether and put the third PlayStation iteration on their holiday lists.

Sony wants its brand equity to colonize as much mindshare as possible. Fifteen million PSP units have been shipped to retailers around the globe -- Sony is banking on this number to go substantially higher after this initiative. It is also banking on leveraging it to create excitement for PlayStation 3 ... and I think the company will be able to do just that.

Some related reading:

Activision, Electronic Arts, and Time Warner are Motley Fool Stock Advisor recommendations. Microsoft is a Motley Fool Inside Value recommendation. The Fool has a newsletter for every investing style.

Fool contributor Steven Mallas owns none of the companies mentioned. The Fool has a disclosure policy.


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