Hype War Goes to Xbox, but PSP Should Thrive

Despite the apparent problems, Sony doesn't appear worried. Company representatives did not return calls seeking comment on PSP sales, but at an investor conference last month, Jack Tretton, co-chief operating officer and vice president of sales and marketing at Sony Computer Entertainment America, argued that the PSP has been a success so far. The company expects to ship 14 million of them worldwide by the end of Sony's fiscal year in March, he noted.

The PSP is a "disruptor in the portable space," Tretton said.

While few analysts would agree the PSP has already achieved that status, fewer still believe the device is a failure. In fact, many think it will do quite well in coming years, and possibly this holiday season.

The PSP should benefit from the fact that the Xbox 360 appears to be in short supply this holiday season, analysts say. Unable to find one of the new consoles, many parents will probably pick up a PSP as a consolation prize, they say.

"It's likely people will make some tradeoffs ... and fall back to the PSP," says Gartner's Baker.

Just because GameStop is seeing soft sales doesn't mean overall sales of the device are weak, notes Michael Pachter, an analyst with Wedbush Morgan Securities, which has not done recent investment banking for Sony or GameStop. GameStop's customers are those who typically have to have a new game or game machine the day it goes on sale, he says. Those customers likely already own a PSP; in contrast, the consumers who are likely buying a PSP this holiday season are shopping at Target (TGT Quote) or Wal-Mart (WMT Quote), he says.

A Target representative declined to comment on sales of the PSP, but sales of the PSP on Wal-Mart's online store have been "very strong," said a company representative.

"The thing's going to be huge," says Pachter.

Sales of the device should pick up after the holiday season once Sony cuts the price, analysts say. And better games should come for the device as the number of owners increases, they say.

"You can put great software on the PSP, but at the current price you're only going to attract a limited audience," says Lin.