A PlayStation Phone Won't Fix Sony's Gaming Business
The new Sony Ericsson PlayStation Phone seems to be more than rumor, as it appears in two different videos on YouTube (GOOG). It's not Sony's (SNE) attempt to grab market share from the Apple (AAPL) iPhone or Google (GOOG) Android smartphones so much as it is a defensive maneuver to keep competitors from taking one of its important markets. But, strategically, it's a mediocre move.
The rumor that Sony has been interested in a PlayStation-branded phone, among other mobile devices, has been around since at least the spring of 2010. That's about the time that Sony's last fiscal year numbers came out and suggested that smartphones were eating into game console sales. Here's a graph I put together at the time showing the PlayStation Portable (PSP) unit sales trend with some mobile phone milestones included:
Gaming has been a big area for smartphones, so little wonder that Sony had felt an impact. In more recent filings, Sony indicated that PSP sales continue to decline and will going forward.
Sony has needed something to counter the upsurge of gaming on smartphones as well as the social games that Facebook delivers to all its users that are interested, including the 100 million or more that use the social network on their smartphones. Hence, the PlayStation phone:
The Sony Ericsson unit, running Android, would appear to have a PlayStation app that would open into some kind of branded gaming experience, with tabs to put games into categories like recently played. It's too early to know whether that means users will download games to their devices or, instead, play online.
I'm sure the unit will pick up some sales, but it probably won't be enough to prevent the business erosion. Because the games need the specific hardware controls of the consoles, there is no way for Sony to leverage all Android phones without considerable redesign of the game user interfaces. That means its entire fortune is tied to one device, rather than the entry set of Android smartphones. Other than to its core audience of gamers, it Sony at a disadvantage to everyone else in the industry.
And even in that market segment, Sony is in danger. The real fans likely already own a PSP. If the new phone doesn't offer something significant that they can't find elsewhere, then Sony risks having its only advantage being a reduction in the number of gadgets someone needs to carry. As it has done often in the past, Sony wants to define the market to its convenience. And, has often occurred, the company is unlikely to succeed.
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