Another headache for Sony: falling PSP sales

Sony is faced with falling demand for the PlayStation Portable and has revised its FY2006 shipment forecast down from 12 million to 9 million

As if the laptop battery recall and stumbles towards the launch of the PlayStation 3 weren't enough for it to deal with, Sony said this week that shipments of its PlayStation Portable (PSP) handheld game device are well below expectations.

Sony Computer Entertainment, the unit of Sony responsible for PlayStation products, expected sales this year to be below 2005's levels, but they now appear to be falling much faster than initially anticipated -- and much sooner after the launch than was the case with the PlayStation and PlayStation 2 consoles.

The PSP was launched in Japan on Dec. 12, 2004, and 3 million units were shipped by the end of March 2005, according to figures from Sony. In the financial year from April 2005 shipments jumped to 14.1 million units as the machine went on sale in North America and Europe. For the current fiscal year, from April 2006, Sony initially said it expected shipments would decline to 12 million units, but this week revised that figure to 9 million units.

Part of Sony's problem has been strong competition in Japan from Nintendo and its Nintendo DS handheld. The DS has differentiated itself from the competition with a unique double-screen layout, a touch-sensitive panel and an innovative software lineup.

For example, the "brain training" game has proved particularly popular with businessmen in their 40s, 50s and above because the software presents a series of puzzles that are said to stimulate and improve brain functions. That's helped expand sales of the handheld to a group of people that have never been gamers before.

"If you look at the availability of software, there are a lot of games for the PSP but are not particularly successful," said Hiroshi Kamide, director of the research department at KBC Securities Japan. "You don't see any million-seller games for the PSP but you do hear about them for the Nintendo DS."

The latest game software sales rankings in Japan bear this out. Seven of the top ten titles for the week from Oct. 16 to 22 were Nintendo DS titles. The most popular PSP title ranked at number 19, according to data compiled by Media Create.

"The big problem is that while it's a wonderful-looking machine with a great display, the games are not so different from those you play at home on the PlayStation 2. Most of the software is knock-offs of PlayStation 2 titles and that won't do Sony any favors," said Kamide.

It's a point with which Sony appears to agree.

"Clearly on the software side, any real killer title will galvanize the sales. There have been a number of titles that have been terrific, but not the one title that defines the product," said Robert Wiesenthal chief financial officer of Sony Corporation of America, in a conference call with financial analysts Thursday.

The quick drop in shipments of the hardware is also out of line with the pattern established after the PlayStation and PlayStation 2 went on sale. The PlayStation didn't register a drop in shipments until its fifth full year on sale, while the PlayStation 2 managed to avoid a slide in shipments until its fourth year on sale. Shipments of the PSP are dropping in only the second full year since release.

To stoke demand, Sony will be looking at how to widen the device's appeal beyond hard-core gamers.

"We are preparing the wiser use of the PSP for the future and also the releasing of a number of software [titles]," said Takao Yuhara, Sony's head of investor relations, during the conference call. "We are always looking at the PSP business expansion."

The PSP includes a number of additional functions such as a Wi-Fi adapter and Web browser, and in recent months Sony has added new features such as GPS (global positioning system) through an add-on GPS receiver, and the ability to subscribe to RSS (really simple syndication) feeds.

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Martyn Williams

IDG News Service

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