The PSP...Back From The Dead Only To Die Again?

I don't know if you've noticed, but there's an odd blip turning up in the Japanese sales reports. Week after week the PSP is making a strong resurgence, consistently beating the PS3 and 360 and nearly hitting the Wii's numbers, in some cases surpassing it. It's an interesting story, seeing as how the system was almost dead in the water last year.

I'm not going to pretend that I'm an expert on the PSP. I don't own one, and up until earlier this year I didn't see a reason to. Sony has also seen fit to throw in multiple versions of it, from the basic to the Slim to Original Recipe to Caffeine Free to Home Premium and now the PSPGo. It's not really a smart strategy, but the PSP-3000 is doing great, so who can argue with success?

The key, as always, are the games. You can have the most awesome graphics EVAR, but if you don't have games you don't have a system. It's the problem that the Wii ran into last year and the PS3 has recently started defeating, and it seems to be working. The best-looking handheld games are on the PSP, and it's enough to make DS owners salivate. In other words, the system is doing well, the games are selling, and it has more buzz around it than it has since launch.

So why is Sony deliberately destroying their momentum?

I've spoken in this space before about the ridiculousness of the PSPGo, in that they're cutting out physical media and hoping to change the format to a download-only format to reduce piracy. Sony states that they'll try and work out some plan so that you can still use the games you've already purchased, and we can always trust the name of a faceless, large corporation as well known for customer satisfaction as Sony, right?

Snarkiness aside, I think this may be a case of Sony outrunning their audience, something they have an unfortunately tendency of doing lately. The PS3 was priced far outside the range of normal users and contained features that normal users (ie, the public at large) didn't want or need. Even three years after launch, Mark Fein from Epic says that less than 50% of these systems are hooked up to HDTVs. Sure, Sony won the HD format war, but at what cost?

The PSP risks doing the same thing. The nearest analogue would be the DSi, the first handheld to try downloadable games. We don't have hard sales numbers on DSiWare games yet, and to be fair, there aren't a whole lot of good ones out there to choose from unless you like Mario clocks and calculators. But we can extrapolate a couple of things from DSiWare:

1. The DSi already had about 2 million units in the wild as of the end of March. Looking at sales figures and the recent Dragon Quest IX launch in Japan, we can safely assume that the number is now at about 4 million and growing steadily.
2. The DSi is aimed as an upmarket solution, namely going after the PSP's audience of people who want an all-in-one gadget.
3. Developers are not lining up to make content for DSiWare yet, even with a relatively large install base.

With that data in hand, we can put this together: The DSi, with its downloadable content solutions, is firmly aimed at the upmarket. The upmarket has spoken clearly that it doesn't want downloadable games on their handheld, and developers are responding in kind. This could be a little bit of chicken-and-egg, as there isn't anything good on DSiWare yet. But if the potential was there for enormous growth, there would things in the pipeline, right? Thus far, the only games we have coming up that are notable are the new WarioWare game and the new Mario Vs. Donkey Kong game. That's it.

So, what could quite possibly happen with the PSPGo? It could die a painful, slow death. The market still wants a game in their hands that they can give to someone else, trade in or sell on eBay. The far upmarket appreciates the ability to download their games to eliminate physical media, but the soft, squishy middle market and the profitable downmarket don't really understand or care.

Another factor that Sony is absolutely not considering at all: Comfort. If I dump $50 on a game that sucks, I can trade it on eBay or sell it on Craigslist. If I download that game, I'm stuck with it forever and ever and ever. It's lost. That's why most games on downloadable services are so cheap. If I lose $10 on a middling game, it's not awful. If I lose $20, it sucks. If I lose $30 or $40? I'm apoplectic with nerd rage. That's a point that even the far upmarket can appreciate, since we've all been burned on a game at least once or twice. On top of that, we all feel a little shiver of joy at our collections, something you can't really do with downloadable games.

And, as I stated before, do you trust Sony to make sure that all your games that you currently own will work on the PSPGo? I have a Club Nintendo account, and even with that I don't trust that Nintendo's next system will allow my Virtual Console and WiiWare games to run properly. Are you absolutely sure that Sony will treat you right in the matter? I can see why many consumers wouldn't think so, because that's kind of a big deal.

So here's the rundown: Developers aren't making downloadable games for handhelds right now since it would seem that there isn't a big demand. A system that is finally gathering some steam is being cut down in the prime of its life for its successor without a clear transition strategy. The upmarket, while intrigued by the idea of a fully downloadable system, still enjoys having the game in hand. Time will tell if I am right or I am wrong, but all of this sounds like a recipe for disaster.