You gotta love Sony (NYSE:SNE). Even though the company's video-game franchise is in the doghouse right now, the electronics giant isn't ready to give up the fight.
Thanks to the continued momentum of the Nintendo (OTC BB: NTDOY.PK) platforms -- I speak of the Wii and the Nintendo DS, of course -- Sony has been forced to take action. During the E3 press briefing, the company announced that it will bring out a new version of its PSP handheld device this September. The gaming technology will remain the same, but the physicality of the unit will be streamlined so that it is lighter and slimmer than the current model -- 33% lighter and 19% slimmer, if you are into specs.
Hmmm ... this sounds familiar, doesn't it? Will Sony actually go so far as to dub the new device the "PSP Lite"? I sort of doubt that -- trademark restrictions, as you can imagine -- but I did chuckle a bit at the news. I mean, will consumers suddenly become converts to the platform because of its new, less bulky design?
I'm not suggesting that Sony is doing this solely to boost sales -- to be certain, changing the size of an electronic gadget is a natural evolution that occurs during a product cycle. Nevertheless, Sony is counting on leveraging the news of this modification to move more units off retail shelves. And while more units probably will be sold, I'm not sure a smaller PSP will be enough to steal much of the DS's thunder. The games for the DS seem to be exerting a bigger hold over the marketplace, especially due to the driving force of the Pokemon phenomenon. Add to that the unique two-screen-and-stylus approach, and you've got a handheld that appears to win the innovation game. The PSP is a powerful machine, and you can play movies and music on it, but so far the buzz has gone Nintendo's way.
The name of the game for Sony now is, unfortunately, price. Cutting the cost of the PSP would make an impact of greater significance than a size modification. It's the same deal with the PlayStation 3; Sony recently lowered the price of that unit when it realized that power doesn't always equal perfection for gamers -- not enough consumers were willing to shell out a small fortune for impressive specs. Thing is, the PSP already saw a fresh price cut, so Sony is not cutting the cost again; the new PSP will carry the same price as its larger, heavier brother -- about $50 higher then the DS.
Nintendo is forcing Sony and Microsoft (NASDAQ:MSFT) to keep up. Even publishers such as Activision (NASDAQ:ATVI), Electronic Arts (NASDAQ:ERTS), and THQ (NASDAQ:THQI) are being compelled to look at the Wii and the DS as important platforms to fuel shareholder value. When the new PSP comes out for the holiday selling season, it will attract attention, no doubt -- but will it be enough to take the lead from the DS? Nope. Only a better price will do that. If Sony can figure out some way to bring the cost down further, it should.
Sony is a strong brand in the video-game world, and it is a competent maker of entertainment hardware and software. It could give Nintendo a ton of competition. It's not going away. But price is key -- as I observed in a look at the May video-game stats, Sony saw a nice boost for the PSP because of the recent $170 price point. It will be interesting to see how the success of the Wii alters the hardware-pricing landscape in the near future.
More Foolish commentary on Sony and its competitors:
Activision, Electronic Arts, and Nintendo are members of the Motley Fool Stock Advisor recommendation list. Sign up for a free 30-day trial of the service with no obligation whatsoever. The Gardner brothers can help you construct a long-term, wealth-building portfolio. Microsoft is a member of the Motley Fool Inside Value portfolio.
Fool contributor Steven Mallas owns shares of Activision. As of this writing, he was ranked 16,029 out of more than 60,000 investors in the CAPS system. Don't know what CAPS is? Check it out. The Fool has a disclosure policy.
