I found myself nodding in agreement with Steven Mallas last week when he argued that movies just might work on the new Sony (NYSE:SNE) PlayStation Portable gaming device. But Steven and I may be in the minority on this issue. I have seen the commentary on Geek.com. I have seen the pessimistic posts coming from the Sony faithful themselves at Sony's own online message board. And, yes, I realize that Amazon.com (NASDAQ:AMZN) has all of 10 movies set to be released later this month, while just two studios have joined Sony in announcing commercial support.

I have read the gripes about pricing from folks who feel that the UMD movie discs should be much cheaper than DVDs, given the lower storage capacity. But I won't echo any concerns about the resolution and video compression, if anyone who has caught Spider-Man 2 on the PSP -- the only title available stateside at the moment, since it shipped with the system -- still has any such worries.

The UMD idea will work. You can pin that on a corkboard and taunt me in a couple of years if I'm wrong. Lord knows that Sony has a history of failing to live up to the hype on many occasions -- think Betamax, Clie, and MiniDisc. Nevertheless, this will work, and the majority of the studios that have decided to stand akimbo on the sidelines will kick themselves for not supporting the format sooner.

Sony shipped a million PSP units last month. Domestic DVD player sales didn't hit a million until the second half of 1998, more than a year after the revolutionary format's launch. You can be sure there were more than a dozen movie titles available at the time.

The thing is, these are incremental sales we're talking about here. I don't have a problem picking up Pirates of the Caribbean on UMD, even though I already own it on DVD. If the film has replay value, the buy makes sense. That's why I'm surprised that no theatrical animation titles have been announced for the PSP. The device isn't a toddler toy, but its impressive 4.6-inch screen isn't that much smaller than those on some of the portable DVD players that I've seen marketed to young families.

Piracy is less of an issue. Yes, software exists to copy ripped movie files from your computer onto the game system's memory stick, but that rewriteable media is too expensive to make it habitual.

I can accept that the PSP will be a gaming device first. Absolutely. Yet even if Apple's (NASDAQ:AAPL) iPod is marketed primarily as a music player, it doesn't hurt that it can double as a digital photo album, too.

Sony's got a hit on its hands. Its track record in the video game space is far better than its consumer electronics history is. And just as game developers will be quick to hop aboard for the next PlayStation model, movie studios should take note of the money they will be leaving on the table by not putting out attractively priced UMD titles as well. Netflix (NASDAQ:NFLX) and Blockbuster (NYSE:BBI) would be well-served by tapping into this format for their online movie subscription services as a way to break into video game rentals down the road.

Something important is happening -- something almost worthy of our Rule Breakers newsletter mindset. It's rattling the retail film distribution channels, just as HD-DVD and Blu-Ray will in a matter of months.

Movie studios: Wake up and smell the buttered popcorn!

Related content on the Sony PSP:

Longtime Fool contributor Rick Munarriz also has a Nintendo DS lying around the house -- though his kids rarely give him the chance to check it out. He owns shares in Netflix. The Fool has a disclosure policy. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.