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Sony Unveils Next Generation Handheld System

Chris Morris, Special to CNBC.com
Thursday, 27 Jan 2011 | 9:27 AM ET

As Apple and Nintendo prepare for a showdown in the portable gaming space, Sony won’t be sitting on the sidelines.

Sony PSP2
Source: Sony
Sony PSP2

The company unveiled its next generation handheld system Thursday – the successor to its six-year old PlayStation Portable (PSP) device. Additionally, Sony announced a new initiative that would bring PlayStation games to Android-based devices, marking the first time the company has opened up its catalog to third-party systems.

The moves showcase the quickly changing nature of the video game industry as smart phones become a viable threat to traditional handheld systems. Historically, single-function devices duked it out amongst themselves for gamer loyalties, but as Apple and other companies have introduced quality games for prices of $5 and less, loyalties have begun to shift.

The next generation PSP – currently codenamed NGP (for next generation portable) - will feature a 5-inch OLED touch-screen display (OLED is a substantially brighter and clearer display panel than LCD or LED) as well as a rear touch panel, WiFi and 3G wireless connectivity, motion sensors, rear and front-facing cameras and dual analog sticks (like the PlayStation controller). The device will be available this holiday season, though Sony did not announce pricing information.

While the screen itself is impressive, Sony’s backing it up with high definition games. Titles for the NGP will be graphically on par with the PlayStation 3 home console, according to Sony.

Analysts say the system, while technically impressive, will still have an uphill battle. In particular, Sony seems to be aiming at the core gamer with the launch lineup, which will include Activision’s “Call of Duty” franchise.

That’s fine for consoles, but it’s unclear how open the portable gaming market is to those sorts of games.

“While clearly differentiated from the more casual games that have made the iPhone a phenomenal success as a video game platform, it remains unclear whether there is mass market potential for high-end portable games,” said Colin Sebastian of Lazard Capital Markets.

The next generation handheld announcement was expected from the Tokyo business meeting, but the tie-in with Android devices caught many off guard – and represents a major strategy shift for Sony. Dubbed PlayStation Suite, the initiative is expected to kick off this year.

Current generation games, such as “God of War 3” and “Uncharted” won’t be ported to the phones and tablets, but games for the original PlayStation will. Sony plans to open a PlayStation Store in the Android marketplace to sell the titles and will offer new and original games that will run on both Android devices and NGP.

The Android integration comes as Sony is preparing to unveil a new ‘PlayStation Phone’ – which will likely tie in with the PlayStation Suite.

It’s also a way for Sony to hedge its bets as the market evolves – something Nintendo is not doing. That company is relying on the novel nature of its 3DS system – which lets users play games in stereoscopic 3D without the need for special glasses – to attract customers when it goes on sale March 27 for $250.

Sony PSP2
Source: Sony
Sony PSP2

Analysts have been vocal in their concern that Nintendo, which has historically ruled the handheld space, is not thinking far enough into the future with the 3DS, as single-function devices fall out of favor with consumers.

The PSP has been something of a mixed bag for Sony. Life to date, more than 65 million have been sold – a respectable number, but far less than half the number of the Nintendo DS. (In the North American market alone, the DS has outsold the PSP on a roughly 2.5:1 basis.)

Pricing and specific launch information for the NGP will likely be announced in June at E3, the video game industry’s annual tradeshow. And pricing could be key to the NGP’s success.

OLED screens aren’t cheap – which is why they haven’t become commonplace with large-screen devices like TVs. And Sony has shown a tendency this generation to price new gaming products far above the public’s comfort level. (The PS3 originally cost between $499 and $599.)

“Their inability to give pricing speaks volumes about where they are right now,” says Michael Pachter of Wedbush Securities. “They’re really, really timid about doing anything now.”

Some analysts have speculated that the NGP – whatever its final name ends up being – will retail for $300 or more, which is more than double the price of current generation PSPs.

“Yes this device gives you more than the PSP, so yes it’s worth $80 or $100 more, but is it worth 2 [times] the price of the PSP? Is it really that good?,” questions Pachter.

Questions? Comments? TechCheck@cnbc.com

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