Well, guess I was wrong. The Universal Media Disc (UMD) movie market for Sony's (NYSE: SNE ) PSP gaming system seems to be sinking fast.
According to The Hollywood Reporter, movie sales to PSP users really haven't done much of anything. Although no official word has been issued, the fate of UMD films appears increasingly dim, considering that Wal-Mart (NYSE: WMT ) has reportedly trimmed back its UMD inventory. Movie studios owned by conglomerates Viacom (NYSE: VIA ) , General Electric (NYSE: GE ) , News Corp. (NYSE: NWS ) , and Disney (NYSE: DIS ) seem to have pretty much abandoned the UMD format as a viable ancillary channel for their respective libraries.
The idea seemed sound to me. After all, who typically uses the PSP? Young males. And what do they like to do once they've defeated the next boss in Kingdom Hearts? That's right: Watch movies. And if they wanted their games on the go, why wouldn't they want a movie or two as well?
That's how the thinking went, anyway -- but statistics tell a different story. If studios and retailers are reducing the resources allocated toward the UMD format, then I have to admit the failure of my previous bullish thesis.
What went wrong? Anecdotally, I've heard complaints regarding the price point. Consumers didn't necessarily feel that paying DVD prices for UMD movies was in their best interests. In addition, some may have considered watching a movie on the PSP little more than a novelty. Benjamin Feingold, president of Sony Pictures Home Entertainment, has conceded that users should be able to hook the PSP up to a TV to watch the films. But with DVD players in most households, especially those in the PSP demographic, this strikes me as redundant.
I don't think the failure of the UMD movie format spells doom for the PSP -- it still has the gaming software, obviously. But it does sting Sony a bit, and it does give credence to the Nintendo philosophy of focusing hardware entirely on great games. Nintendo believes that its DS unit should be judged on its ability to play a killer round of New Super Mario Brothers, not on whether it can host the latest film by The Rock or the latest song by U2.
I'm not ready to give up on the PSP video market just yet. I think it could be easily resurrected if studios figure out a price point that will generate demand and make UMD movies a tantalizing value-add for the PSP. And UMD videos could still be used for promotional marketing schemes in the future. A film from one of Sony's studios could be promoted via free giveaways of a UMD containing behind-the-scenes footage. Call me a crazy optimist, but I don't think that tactic will ever be precluded by the less-than-successful sales of the UMD movie market.
I think the UMD movie experiment was worth the effort, even if it didn't catch on. PSP users simply prefer to play games (and music, presumably) on the device. I suppose hindsight says that this shouldn't be a shock, since kids can download cheaper portable content for their Apple video iPods. They also already have access to cheap movies via pay-per-view and video-on-demand technologies. Hindsight can be so 20/20, can't it?
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Fool contributor Steven Mallas owns shares of Disney and General Electric. The Fool has a disclosure policy.
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