PSP Retools in Bold First-Place Bid

Sony Turns to Price Cuts, High-Octane Marketing to Grab Hand-Held Share

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With some deft strategy strokes -- a dramatic price drop, a new target demographic, broader content and aggressive marketing -- Sony is angling for the dominant share that's eluded it since the PSP hand-held bowed two years ago.
Sony PSP
Sony has changed gears with its hand-held gaming system, the PSP, in an effort to steal back market share from Nintendo and the DS.

Companion Piece:
PSP's Missteps



In April, it cut the price to $169, and the drop to a sub-iPod price is attracting attention. "It's a price-sensitive market, and if you cross the right price point, you can really explode sales," said Rob Enderle of the Enderle Group.

John Koller, senior marketing manager for PSP, said April sales numbers at the lowered price should reflect a "significant" uptick. NPD Group data put PSP sales in March at 180,000 vs. 508,000 for Nintendo DS.

Changing sights
Another big change in Sony's strategy is its target audience. The company first pitched PSP to an "urban-nomad" target defined as a late-20s male commuting to work and watching movies, listening to music or playing games on the way. And that's who bought the PSP -- for the first six months.

But around holiday 2005, Sony saw more and more teen buyers, and today "the 13- to 17-year-old male is really our core audience," Mr. Koller said. The ad campaign reflects the change, featuring younger kids and an irreverent tag: "Dude, get your own." The agency is Omnicom Group's TBWA/Chiat/Day, Los Angeles.

To further draw in those younger users -- and their parents -- Sony is expanding its game content with more family-entertainment fare from its own studios and asking the same of its third-party developers. Both also are developing more content exclusive to PSP.

More than high scores
Going beyond gaming -- Mr. Koller called PSP "a multifunction body with a gaming heart" -- is still the promise of PSP, he said. Today 70% of people buy PSP for gaming but quickly begin to use it for music and video. Sony's counting on them to help spread the word.

"In our opinion, these teens will be the influencers who could actually influence up. It's a group we're really going to ride the next year or two and expect significant sales from," Mr. Koller said.

Optimistic? Maybe. But if there is a comeback, marketing will have played a key role. "Sony is a good marketing company, and if they dedicate resources to attracting this audience and deliver more games, they'll get renewed interest," said ABI Research analyst Mike Wolf. "All is not lost."

PSP's Missteps

  • Too expensive. With rival Nintendo DS launching around the same time $149, PSP's initial $249 price suddenly looked exorbitant.
  • Marketing snafus. Edgy ads in Europe had protesters complaining of racism; graffiti ads in New York subways were removed; and a "fan site" forgot to mention it was created by a Sony shop.
  • Wrong target. Although 29-year-old males initially scooped up PSP, it lasted only for a few months. The teen buyers who flocked after that only now are being addressed.
  • Not enough exclusive games. Too many PSP games were being ported to PS2. The owners of the uniquely shaped and multifunctional PSP wanted their own games.
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