• by Steve Smith , Staff Writer @popeyesm, June 26, 2007

In this week of the iPhone, it is good to temper the hype with sober history about the track record of technical marvels in the marketplace. Apple's is not the only mobile convergence device in recent years to hit the market with dazzling hardware, great promotion and press hype to drive it. A couple of years ago, no less a powerhouse than Sony launched its technically scrumptious Playstation Portable (PSP) as a home theater for your pocket. Two years later, Sony is struggling to keep up with the Nintendo DS, a much simpler and cheaper game system that is mopping up the PSP in every worldwide market. In the last month, Sony completely repositioned and retargeted the device, cut the price by $30 -- and, for all its effort, still sold little more than half as many PSPs last month as Nintendo sold DS handhelds.

Even when you bring a startlingly good new toy into the market and succeed in grabbing the early adopters, the question becomes "then what?" Sony seems to have been learning a hard lesson that some analysts predict Apple may experience later this year. Selling the first few million units may be the easiest part.

When it first launched with a $250 price tag, the PSP pretty much priced itself out of the core market for a handheld game device -- the 13-to17-year-olds -- and had to focus instead on 20something tech dweebs with disposable income. That proved to be a limited market for Sony, and the expensive PSP seemed stalled while Nintendo ate up the market with its $129 DS. "We've seen a trend toward a younger male market since holiday 2005," says John Koller, Sony's PSP product manager. He says registration for the PSP in that age group have been ramping up but "price was seen as an impediment to purchase," so the PSP is now selling for $169.

There is no denying that the PSP is an amazing achievement in portable hardware quality and versatility, but it has always been unclear what I should do with it. It plays movies, multimedia downloads, MP3s, browses the Web, and plays games (any of this sounding familiar yet?) and yet each one of these functions has built-in limitations that never let it become my default device for any of these activities. As a game device, it suffers a limited library that tries too hard to mimic console game play.

Meanwhile, Nintendo and every mobile game maker has discovered that people crave very simple or unique game play from their handhelds. The unit is just too big and heavy to carry around for gaming, while the DS is lighter and promises more novel experiences. For quick pickup play, phones are better and always there. As a movie player, the PSP display is just stunning, and its audio with headphones is great, but the UMD discs initially cost the same as DVDs and required that I buy a favorite movie twice in two formats. You can get them now in the remainder bin at game stores for $5 as Hollywood loses interest in the format. As a Web browser, it is not only hobbled by a sluggish 802.11b connection, but a navigation scheme that makes me wince at the prospect of loading the browser at all.

Koller says that the company initially suspected that film viewing would be the most popular non-gaming activity on the PSP, but apparently loading music onto the thing is more important to many users. Downloading content is becoming another unexpectedly popular PSP activity, and so Sony sells a PSP Media Manager for transferring media from PC to PSP and subscribing to podcasts and even RSS feeds. In fact, Sony is encouraging users to download the recent TV spot for the PSP because the creative directly addresses that guy next to you who is salivating over your PSP. The "Dude, Get Your Own" series features a plane passenger who is being bugged by others on the same flight who want some piece of the PSP experience.

Ultimately, Sony is really continuing to make the same mistakes with the PSP now that it made before the retargeting effort. The company says it is urging third-party game makers to design novel, mobile-appropriate titles, but Sony itself is hyping the upcoming "God of War" for the PSP, pretty much a port of the very popular console title. They still lack a free download portal that even approaches the usability of Apple's iTunes, so moving content onto the thing remains a chore. It is still too bulky to be truly portable. While a good game like the recent puzzler "CRUSH" or "LocoRoco" will bring me back to the PSP on occasion, I almost always play at home -- so the natural competitor for the PSP is the PS3, Wii or Xbox 360. The DS is the one that gets tossed in the travel bag. And even the TV ads for the PSP are reiterating the early adopter ethos by creating a scenario where 20somethings covet the technology.

Sony is discovering that the convergence device is a tough sell. If consumers don't make full use of a technology's range of functionality, then all of that extra weight and expense involved in including those features seem like wasted money and space. A prescient investment analyst told me once that there was only one multi-function device that ever took hold in the market -- the clock radio. Arguably, the phone/camera is the other more recent example. But in both cases those are dual, not multi, functions. Keeping the consumer, the technology, and the marketing focused on getting just one or two features right is hard enough for any product. The question for Sony -- and for Apple, for that matter - is, how do you juggle three, four or more?