slice of koh

In an interview with MTV Multiplayer, John Koller, Director of Hardware Marketing for the PSP, would only confirm that part of the UMD-free PSP rumor is true.  Whether it is true or not, this is pretty interesting from both a consumer and business perspective.  

From a consumer perspective, this can be good or bad.  Let’s start with the good things.

1) UMD-free PSP means much better battery life and much smaller form-factor.  PSP stands for Playstation Portable after all.  Compared to the Nintendo DS, the PSP always lost in the battery life department.  By having a big screen with much higher resolution and a spinning disc, the PSP at best had 5-6 hours of battery life in my experience.  The Nintendo DS ran circles around that.  Without the UMD, the PSP will definitely last a lot longer per charge.  The form factor will also be much smaller because there is no UMD to insert; however, the hardware will feel more solid as there will be less moving parts.  Imagine replacing the space taken by the UMD with a much bigger battery.  

2) UMD-free PSP also means that one does not have to worry about damaging their games.  Even with a large PSP case, one can only take a few games with them at all times unless they are willing to carry their UMD library in a separate portable storage case.  There is also a chance that one may lose or damage their UMDs while on the go.  As a UMD-free PSP would play games downloaded to a memory card, there is no need to switch game discs or carry a lot of bulk.  In case that your memory card does become corrupted, surely your online account will have records of what licenses of video game software you legally purchased and downloaded.  

3) UMD-free PSP would probably curb piracy, so there would probably me a lot more games than the original PSP.  Compared to the DS, the PSP is certainly lacking in a game library even though it is targeted to a more mature audience.  I buy more games for my Xbox 360 through live and retail than for the PSP.  Piracy is a major reason why many developers were not attracted to developing original video games for the PSP.  

On the other hand, there are bad things for the consumer….

1) Consumers will be unable to purchase used games.  As digital downloads would be the only way to purchase your software, the consumer is unable to trade or sell their old games for new games.  In order for Sony to make this an attractive option, they must lower their MSRP for their new releases for download through the Playstation Network.  I can’t imagine any consumer willing to fork over $30-40 for a digital copy of the software.  

2) Consumers will need a computer with internet connection to purchase and download software.  As much as I would like to be naive and think everyone has a computer and access to a reliable broadband connection, it will make it harder for some consumers to justify this purchase if they do not have reliable broadband access to the internet.  I am certain that Sony will make it easy for their consumers to purchase and download their games through brick-and-mortar outlets, but this will definitely appeal to consumers who are *cough* well-off *cough*.

From the business perspective, Sony is facing some upsides and downsides as well.  The upsides are…

1) By going UMD-free, Sony could effectively curb pirating of illegal UMDs.  PSP games are region-free, and it was fairly easy to download hundreds of ROMs to your memory card.  That means more sales revenue for Sony and its developers.  More $$$ make business happy. 

2) There could be more interested developers for the hardware as it will cost less to distribute games online compared to selling them in brick-and-morter stores.

3) Opportunities to track consumers through their online purchases and downloaded demos for better targeting.  This could make marketers’ lives a lot easier.  As consumers would have to download games through PSN, companies can track their consumers’ purchases and better able to position their products for that consumer.  Based on past purchase and browser history, companies could recommend similar titles that would interest the consumer.  Add the ability to network with their friends and fellow gamers, and you got yourself a viral network campaign.

The bad things are…

1) UMD-free PSP could alienate major retail partners.  Traditional brick-and-mortar stores and used game retailers would probably be hesitant about this arrangement because sales of new and/or used video game discs are huge traffic drivers for these businesses.  To ensure retailer support, Sony would probably enable consumers to download games to their PSP at these stores or buy “points” cards to redeem on PSN at home.  

2) Another PSP refresh can frustrate consumers with frequent hardware updates.  Although there is a consumer segment who welcomes hardware refreshes to stay “ahead of the curve” and be the creme-de-la-creme of the techno-savvy, most consumers are price elastic and would like to spend their money on games rather than upgrade their hardware.  Unless, there is a perceived value by the consumer, most consumers will just stay with the PSP they have or postpone their hardware purchase until the next one comes out.   

3) A new PSP update would not only frustrate consumers, but the rumor of it being UMD-free could alienate consumers who do not have broadband access or would rather buy physical discs.  If you can believe it, there are still consumers that prefer to buy their games in cases as physical evidence of the transaction.  It is hard for some consumers to receive a digital good in exchange for physical cash.  The music industry thought that consumers would never buy MP3s because they could always download it from someone else via Napster.  If there is a user-friendly way to buy and listen to those MP3s (Apple Itunes and Ipod), consumers will pay for that convenience.  

UMD-free PSP?  I don’t know if the world is ready for it…