The secret gem of PSP

I bought a PSP yesterday so I could watch videos during my weekly commute to Guangzhou. I struggled for half an hour trying to get it to play the Google videos I downloaded. Turned out that I put the ".MP4" inside the file name while the extension ALREADY was MP4.

PSP's video playback quality is amazing. Much better than the alternatives I've looked at, including iPod video. And it's selling at half the price of most others. Yet Sony is not touting its strength as a video player at all. Why the reservation? Here's my guess.

First, why is it selling at a relatively low price? The video game business is a lot like the printer business. When HP sells you a printer, it doesn't earn much. After all, the printer is just a bait to get you to buy HP ink/toners for the next couple years, and that's where the real margin comes from. It's just another case of law of complements at work. The lower the price of a product (printer), the higher the demand for its complements (ink/toners). That's why you see laser printers selling at under $1000.

In the same manner, game console is just a bait to keep you buying games. How much are the console-makers willing to dole out to bait you? Microsoft, for one, is willing to lose US$150 per XBox! I couldn't find any data on how much Sony makes / loses for each PSP sold. But given its price tag, I suspect the margin is very low, if not negative.

I bought my PSP just for playing videos I acquire elsewhere. So chances are, Sony is losing money on people like me (and those who buy pirated games, of course) even if you count the 1G proprietary memory stick I bought. And that's probably why they are keeping PSP's amazing video quality low-key. But who knows? Maybe they'll exact revenge on me with an irresistable Winning Eleven XI.