Can PSP Win Over Movie Fans?

Gamers have now had more than a week to buy the new Sony (NYSE: SNE  ) PlayStation Portable (PSP), and I'm sure lots of them are happy. Although I haven't test-driven one of them yet, I've seen the commercials and some other materials, and I'm impressed. After all, we are talking about Sony here. The company usually does good work with this kind of stuff.

But I'm not here to talk about the quality of the system. I'm here to discuss a question being debated: Will users use the PSP mostly for games and ignore the movie-playback function, or will movies generate a steady stream of income for the unit? I touched upon this subject in passing in a previous piece, but after I recently heard some doubts about selling PSP users on movies, I thought I'd expand on my view.

It comes down to this for the naysayers: PSP buyers want to use the device to play games, not watch movies. Those bearish on the prospects of Sony's proprietary Universal Media Disc (UMD) cite this hypothesis repeatedly, and they support it by saying that home is where people feel most comfortable watching films on discs. They'll probably also tell you that no buyer is going to invest well over $200 in a portable movie player first and a gaming machine second.

Make no mistake: I get the argument. And it's a good one. But consider this: The world is becoming more portable. Sounds simplistic, but it's true -- people want all manner of electronic devices that can follow them on the go. And they want these devices to be capable of providing maximal entertainment. The PSP fits the bill. It has a music dimension to it, which might be bad for Apple (Nasdaq: AAPL  ) . It has the games, of course, and it's got the movies. That gives it the cultural trifecta. Think of cell phones -- would any of us have thought, way back when, that something so utilitarian would turn into a device that plays games, downloads stock quotes, and lets you program annoying ring tones? I think the presence of a proprietary medium -- UMD -- will allow companies like Viacom (NYSE: VIA  ) and Time Warner (NYSE: TWX  ) to generate more revenues from their libraries.

This isn't an experiment on the level of disposable DVDs, although I admit I held out hope for that idea. We know that people want the ability to watch films on the go. On an anecdotal level, I've come to realize that more and more consumers are adopting portable DVD sets. So it makes sense to me that users will investigate the UMD movie selection and that it should be a smart move for Disney (NYSE: DIS  ) and the rest to position themselves early on in this arena.

Also consider that the argument against UMD movies is an argument for strategic stasis on the studios' part. Put another way, will studios merely replicate their libraries on the format without any sort of clever schemes? Check out this thought experiment -- George Lucas wants to make some money off PSP players but doesn't want to release his Star Wars properties to UMD because he believes that the DVD releases have already satiated consumer demand. What if he releases a new documentary on his famous trilogy to the PSP? How many PSP users are also ardent collectors and would snap up such a disc just for its potential as a collectible?

I'm excited about the PSP as a movie player. People need entertainment when traveling. When they need a break from video games, they may want to watch their favorite movie or TV show -- and if they don't want to watch the whole thing, at least they can sample some preferred scenes. Yes, I might be totally wrong, but I'm looking forward to the final verdict on UMDs down the road.

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Fool contributor Steven Mallas owns shares of Disney.

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