The PSP was NOT a success
Troy Wolverton has posted an article on TheStreet.com discussing how the PSP is losing all its hype to the XBox 360. Troy is 100% correct on this point. What little media attention the PSP was getting vanished once the XBox 360 came out. That is because the media moved on and now has a new darling to talk about and pick on.
Troy also discussed the reasons the PSP failed to catch on fire like it was suppose to. The main reasons he gave for the PSP failure were: the lack of good games, the price point and the loss of hype thanks to the XBox 360. Troy also wrote that the PSP may gain sales this Christmas as an alternative gift for people not able to get a XBox 360. From that comment it looks like Sony may be attempting the Dreamcast Gambit.
The Dreamcast Gambit is where system A is sold out, so another company B that makes system B tries to capture some of demand for System A. This happened five years ago when Sega attempted to increase the sales of the Dreamcast when the Playstation 2 sold out at launch time. This gambit works well in the short run since system B's sales goes up. In the long run it does not work since sales of System B and its games go down as supply meets demand for System A. That is because most consumers really just want System A and will take System B as an alternative till they can get system A. When consumers finally get System A they abandon System B... That is, unless the company making System B gives consumers a reason not to abandon it. Or the company that is making system A fails in a huge way to the follow up after the launch of system A.
This gambit failed for Sega with the Dreamcast and ultimately forced them to cancel the Dreamcast. Whether the Dreamcast gambit will work or not for Sony is still out there. That all depends on how Sony and Microsoft follow up their systems after Christmas. Right now signs are pointing to a failure if Sony attempts the Dreamcast gambit.
Enough gaming econ theory, lets get back to the subject on hand. While I agree with Tom 100% that two of the big reasons the PSP failed was the price point and lack of games. I think neither of these where the main reason.
The main reasons I think the PSP failed are: Sony does not understand the hand held market, the marketing of the PSP was poorly done and the PSP does a lot of thing Okay but not one thing well. The biggest failure had to be the marketing. When the PSP first launched, as I noted here, the Sony marketing department seemed more interested in promoting God of War than the PSP and the games for it. Two weeks into the launch Sony finally started actually marketing the PSP on the web and TV. By then however it was too late.
The next failure was to run the same commercial for 6 months. I still see the same commercial from April when the PSP launched on the TV and the web. Most consoles at this point in system launch cycle have moved away from advertising the system and on to advertising the games. Granted, very few PSP games are worth advertising, but there were a few. Sony choose not to advertise them on TV. On the flip side I have seen a ton of ads for UMD movies marketed along side the DVD advertisement.
The another big marketing failure was Sony's attempt to market the PSP as a multimedia machine and not a gaming machine. When gamers heard about all the neat multimedia things and UMD disk their eyes perked up a little. However when they found out the cost of the Memory sticks and UMDs most gamers gave out a loud groan. Then they heard how it was a multimedia machine and many felt Sony was abandoning them in favor of the MP3/movie crowd. Sadly, this attitude may be correct as Sony continues to push the UMDs over the games.
In addition, the MP3/IPod/Gadget guys yawned at Sony's attempts to market to them. Again because of the PSP battery life and lack of a decant amount of storage. I am sorry but 1 GB no longer cuts in the MP3 gadget market.
This all adds up to Sony not understanding the Hand held market. The hand held market is not like the console market. The games that do well in the hand held market are either long games that can be played for long hours, short, quick, pick me up games, or games like Tetris that can do both. So far the only game that meets that requirement is Lumnies.
Another big factor that Sony missed was the price point of hand held games. Hand held gamers expect to pay 15-30 dollars per game. Yet Sony is trying to sell PSP games in the 25-50 dollar price range.
Another issue is that gamers expect the price of an old game to drop after six months. This has also not happened. PSP launch titles still sell for around $40. Even the crappy ones like Tony Hawk Underground 2.
The PSP can still succeed as Troy pointed out. That is if Sony does a few things. First, Sony needs to figure out a way to increase the battery life and increase the maximum data storage for a low price point. Second, Sony needs to get more good games out there for the PSP that hand held gamers like. Third, Sony needs to lower the price point of the PSP and the PSP games. Fourth, Sony needs to get on the marketing ball and start advertising the games not the system or the UMDs. If most of that happens Sony could just make the PSP into a success.