This is an interview with PSP product manager John Koller about Sony's new focus on the younger consumer; Also with Wedbush Morgan and Securities games industry analyst Michael Pachter about the situation. Here are his thoughts.

PSP is getting outsold by Nintendo DS about two-to-one worldwide. Can Sony close this gap, or is it too late?

I don't think Sony will close the gap, and don't think it is important that they do so. Nintendo has over 20 million loyal GBA owners, and we should expect them to dominate the category that they invented. Sony is late to the handheld game, has tried to approach the market from an older demographic, and is just now trying to beef up more kid-friendly content to appeal to 13-17 year olds. I don't think that the gap matters at all, so long as Sony makes money. I also believe that price elasticity of demand dictates that the lower priced product will sell more units. That's why there are more Fords than Maseratis.

Software sales are rather low on PSP. In light of this, how can Sony convince software publishers to keep bringing games to PSP?

Software is going to grow as the installed base grows. There are really not many more third party games for the DS than for the PSP. Most third parties are supporting both, and as long as the PSP appears to be growing its installed base, I expect to see a growing software library.

With Sony's John Kollar saying today that the company is shifting its focus to the 13-17 year old market (away from the 18-34 year old demographic), does this represent a good move for the platform?

The "focus" on younger gamers is an acknowledgment that the market is still there, and recognizes Nintendo's success with this demographic. Hand-helds are still considered by most to be a "starter" set for consoles, and although the PSP is effectively a hand-held console, it has as yet to overcome consumer perception. Games can go a long way toward shifting that perception.

Do you think Sony will introduce a new PSP model in 2007, one that takes more advantage of the fact that most PSP owners are downloading music and movies and need extra storage space (on board flash, a hard drive)?

I think a new model is a certainty, but it's hard to say that it happens in 2007. I predicted this in January 2005 (it's all over the Internet), and still believe it will happen, but can't predict the actual date. Flash is more likely, given the success of the iPod Nano.

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