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Sony Expects Initial Loss on PSP Hand-held Device
May 13, 2004
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Sony Corp. does not expect to make money on its new PlayStation Portable (PSP) hand-held games console at launch, due to the price of components and initial development costs, the head of Sony's U.S. games unit said.

In an interview with Reuters, Sony Computer Entertainment of America Chief Executive Kaz Hirai said the company would need to have a minimum of six to 10 games available at the PSP's launch, both from its own studios and from third-party publishers.

But at the same time, Hirai said, it would not need that many games at launch if it could identify one or two breakout hits, "killer apps" that would drive consumers to buy the hardware just to play those games.

"It could be as little as six titles, maybe with one or two great killer (applications)," Mr. Hirai said.

Sony plans to launch the PSP, its most significant new game hardware in 4 years, later this year in Japan and in early 2005 in North America and Europe. It has not set a price for the unit, which will also play music and movies, though most in the industry expect a price in the range of U.S. $199 to $299.

"So if you're saying 'Day one, are you going to be profitable on the hardware?' then probably not," Mr. Hirai said. "Hopefully, this will have a 10-year lifecycle, at which point I'll look back and say 'Yes, definitely profitable.'"

The PSP will use a new kind of disc designed by Sony called Universal Media Disc (UMD). With three times the capacity of a standard CD, the company is pitching the format to other movie studios and music companies as a new medium for their content. Mr. Hirai said Sony would almost certainly have other devices that use the new format besides PSP.

"We have very high ambitions for this new format," he said. "I don't think you can establish a format with just one hardware platform," he said.

The company has also recently focused on storage for the PS2, releasing a 40-gigabyte hard drive in March, though as yet it has only one function, letting users play "Final Fantasy XI."

Mr. Hirai said Sony was committed to adding new features for the hard drive, though he declined to commit to a timetable for launching services like a long-planned custom version of the AOL service.

He added that he would consider other storage media with less memory than the hard drive, such as high-capacity memory and USB devices. (Reuters)

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