Sony Heads Full Speed Into Mobile Entertainment With Its New PSP

Sony Corp. surprised the consumer electronics and video game industries Wednesday when it unveiled the sticker price for its upcoming PSP hand-held game device -- under $200, far less than expected.

That suggests that the Japanese consumer electronics giant plans to cut an aggressive path in mobile entertainment, a fast-growing market carved up by cellphones, music players and a cacophony of souped-up devices that deliver digital movies and music in pocket-size packages.

“This is a battle for all of mobile entertainment,” said P.J. McNealy, an analyst with American Technology Research in San Francisco. “It’s not just about gaming.”

Although Sony initially will target only gamers with the PSP, the palm-size machine is built to play digital movies and songs on proprietary disks the size of drink coasters.

Sony said the PSP would retail for about $186 when it hits the Japanese market in December. The PSP will be in U.S. stores early next year, and U.S. prices for Sony products have traditionally been lower than in Japan.

The PSP is an offshoot of the successful PlayStation game franchise. Sony launched its first PlayStation console in 1995 in a market dominated by game industry titans Nintendo Co. and Sega Corp. Within years, Sony was the unchallenged leader. More than 72 million PlayStation 2 consoles have been sold worldwide.

Sega stopped manufacturing consoles, and Nintendo is now in third place behind Microsoft Corp.’s Xbox.

Sony is hoping to duplicate that success in mobile entertainment, a market it popularized in 1979 with the introduction of the Walkman. As with the PlayStation business, Sony plans to subsidize the hardware manufacturing costs of the PSP with sales of games and, eventually, music and movies.

“Just like the home console business, Sony’s banking on sales of games, music and movies to make up for any losses from the hardware,” said Ross Rubin, analyst for NPD Group Inc., a market research firm. The retail price for the PSP is “aggressive pricing.”

The $200 price point is considered the dividing line between mainstream consumer electronics and hipper, cutting-edge products.

That doesn’t mean the PSP won’t have tough competition. Powerful next-generation cellphones featured at this week’s Cellular Telecommunications & Internet Assn. show in San Francisco promise to stream music, movies and games.

At the same time, companies such as Apple Computer Inc., Samsung Electronics Co., Rio Audio and Creative Technology are serving up devices with miniature hard disks that can store thousands of images, songs and other digital files. Apple introduced the iPod Photo, which will come in two versions that will sell for $499 and $599, on Tuesday.

“We’re seeing several business models developing right now,” McNealy said. “There’s Sony’s disk-based model versus Apple’s disk-drive model versus the cellphone streaming model. And this year, we’re going to see them all go head-to-head in the marketplace for the first time.”

Who will win? “In the near term, companies with the hard-disk drives have some momentum,” McNealy said. “But as flash memory prices go down and other storage options grow, the hard disk will have a run for its money.”

Meanwhile, Nintendo isn’t sitting still. The Japanese maker of Game Boy is set to launch its Dual Screen Game Boy in the U.S. on Nov. 21 at $149.99. The device plays videos, though Nintendo has positioned it as a pure game machine.

“Nintendo has beat out many other competitors in this field,” said Perrin Kaplan, Nintendo’s vice president for marketing. “It knows its business very well.”