Sony (Geeks) vs Sony (Droids)
"...they're also going to be releasing videos of some movies for the PSP on the special format discs that will only work on the PSP. At what point does Sony realize that they're shooting themselves in the foot? People don't want proprietary formats that only work in very specific devices any more, and every time Sony tries and fails to do so again, they seem to simply ignore this lesson."
Yes and no. It's not analogous to Sony' position with ATRAC for a fairly interesting reason - the format wars for next-gen video haven't played themselves out yet. MP3 was long-established as the digital audio standard when Sony aggressively pushed ATRAC, which was of course an inferior strategy which immediately caused a scale disadvantage.
But this case is different - in fact, there's massive standards fragmentation in the video market, which creates significant barriers to consumption - on average, consumers have to learn a lot
before they get anything resembling working video at a decent resolution. This is a key leverage point.
So, if Sony plays a purely proprietary strategy, it will be easily dominated. But if Sony actually uses it's format as leverage to achieve first-to-scale, by making it at least to some extent open/interoperable, it has a huge chance to win the market. But that has to be the key strategic understanding.
Umair, you're pretty much on target. The main reason Sony has chosen to go with proprietary technology is because a dominant format/media hadn't been established yet. Just to clarify, ATRAC technology actually came out before mp3 became popular, but ATRAC was tied to the MD. Back in those days, mp3 wasn't dominant yet, but ATRAC wasn't able to unbind itself from the MD before mp3 spread like weed. In this case, only the UMD format is proprietary; the video codec in which the movies will be encoded is (ableit a varient of) MPEG4. MPEG4 was chosen since at this point it didn't make sense for Sony to try and invent another video codec as most other requirements were already being satisfied. Standards bodies take forever to reach a decision, which is often times why companies forge ahead with a proprietary verssion (witness the wifi community). Unfortunately, cutting one's losses is virtually unheard of in Japanese culture, and since Sony is ultimately run on a Japanese mindset (surprise, surprise), it's made some questionable moves in the past. Let's hope it has learned something ;)