PSP vs DS
With all the buzz about the PSP launch, it's worth reading this piece at GI, which points out that Nintendo's strategy is to penetrate and dominate entirely new market segments. While the PSP is certainly cool, it's questionable what the marginal benefit will be to Sony - how much more
will the same target really spend on games?
A PSP plus five games is $500 - a fairly big chunk of discretionary income, even for apparently loaded 18-34 year old dudes like you and me. Now, if the PSP was in competition with the DS/GBA, I'd be worried if I was Nintendo, and happy if I was Sony, because I'd be penetrating and possibly dominating the market which has been subsidizing Nintendo's creativity for the last ten years. But I don't think the PSP is competing in the same market: it's much more expensive, and the games are targeted at older players. So I don't see Nintendo's total domination of the handheld gaming space - powered by younger players - begin challenged. In fact, I think Sony runs the risk of cannibalizing the PS2 franchise.
Now, don't get me wrong - I think the PSP is the coolest thing since Optimus Prime. It's a great product. But is it backed up by the new economics the games industry needs to accelerate growth? As I've pointed out before, what the games industry really
needs is a fundamentally new economics built on diversified revenue streams and more efficient risk-sharing mechanisms, like the film industry. I think Nintendo has a better long-term shot at achieving this, despite the revenue bump Sony will gain from the PSP.