Hype War Goes to Xbox, but PSP Should Thrive

A more complete gauge on PSP sales should come out later this week when the NPD Group, an industry research firm, releases its November video game sales data.

Analysts say sales of the PSP in recent months have been hindered in part by the attention paid to the Xbox 360, which made its debut last month. The launch drew attention because the Xbox 360 is the first of a new generation of consoles that are expected to be on the market within the next year. With its high-definition graphics, sophisticated online gaming system and multimedia capabilities, the Xbox 360 is expected to steal share from Sony's market-leading PlayStation consoles in the new product cycle.

The PSP "is not where the focus of the gaming market is right now," says Van Baker, an analyst with Gartner, an industry research firm.

But even if Sony were able to push through all the Xbox 360 noise, it faces another problem in pushing sales of the PSP: price. The base PSP package costs $250. Add in a couple games and a decent-sized memory card on which to store game data or some songs, and the price jumps to well over $300.

The PSP's price is "prohibitive," says the Simba Group's Lin. "That's a huge purchase."

The other big problem facing the device is the lack of compelling software titles. To date, there have been no "killer aps," say analysts. Instead, most of the games developed for the system are simply reworked versions of games developed for the PlayStation 2 and other consoles, they say.

"Right now, there is very little on the PSP that is compelling," says Joe Spiegel, who follows the video game sector as a hedge fund at Dalek Capital. Spiegel has no position in Sony but is long shares of Nintendo.