The PlayStation Portable is definitely cool, and sales are hot, but the thinking behind it is tepid. Is this really the Walkman for the Digital Age?
By Peter Lewis

(FORTUNE Magazine) – SONY'S NEW PSP (PLAYStation Portable) handheld entertainment system just went on sale in the U.S. for $250, and there's no doubt it will quickly exacerbate the U.S. trade deficit with Asia. As a portable videogame device the PSP is unmatched, the kind of top-of-the-line product we used to expect from the wizards at Sony back in the pre-digital age: fun, stylish, solidly built, and technologically impressive, a premium product at a price to match.

But the glossy black PSP is much more than a miniaturized version of the world's most popular videogame console. It's also a portable music and movie player, and that's where the vintage Sony, the company started by engineers, is in conflict with the more recent Sony, the company dominated by entertainment executives who, in the interest of protecting their movies, music, and games from digital pirates, demand restrictions on the capabilities of Sony hardware. (See "Inside the Shakeup at Sony.") By only halfheartedly embracing the possibilities of the digital era, Sony has created an impressive digital device that reaches only some of its potential. The PSP lacks a hard drive, for example, and its USB and Wi-Fi media transfer systems are restricted.

That said, Sony will sell millions of PlayStation Portables, just as it has sold tens of millions of PlayStation 2 game consoles. The PSP packs nearly all the graphics power of the PS2 into a sleek, battery-powered device that's built around a dazzling 4.3-inch color LCD display. Forget any screen you've seen on a cellphone, PDA, MP3 player, or gaming device; Sony's PSP screen just blows them away. It's not much larger than a business card, in roughly the same proportions, but you'll wish your home television had as sharp and bright a picture. The PSP pumps out crisp stereo sound, and the game control buttons will be familiar to any gamer who has ever gripped a PlayStation console controller. Sony has enticed nearly every major game publisher to create titles for the PSP, and a good selection of desirable games is already available. The fun is multiplied when two or more PSP owners take advantage of the device's built-in Wi-Fi wireless networking for ad hoc multiplayer competitions.

So why only one heavily calloused thumb up for the PSP, instead of two? It's not the $250 pricetag, which is at least $100 higher than for any of Sony's handheld gaming competitors and more than a bit steep for the core gaming demographic of 10- to 25-year-olds (and their parents). The price is reasonable, given that Sony is aiming for a broader and older audience, one that has recently shown an appetite for Apple iPods, digital photo albums, and portable DVD players. When the gamer wearies of playing Metal Gear Acid, Ape Escape, or Gretzky NHL, he can rock out to his favorite music, enjoy a portable slide show of digital photos that will incite technolust in any grandmother, and even watch full-length motion pictures like Sony's Spider-Man 2, a copy of which is included in the PSP package along with a sampler disc of games and music. Does this sound like the ultimate backseat pacifier for long road trips? Heck, it even sounds like the ultimate aisle-seat pacifier for business travelers.

And here is where it gets gnarly. Sony has made it unnecessarily hard and expensive to move music, photos, and movies to and from the PSP. One way is via Sony's proprietary Memory Stick Duo flash memory cards, which cost more than other portable storage cards. Sony includes a 32-megabyte Memory Stick in the PSP bundle, but it can store only about one audio CD's worth of tunes. A one-gigabyte Memory Stick, capable of holding 250 songs or thereabout, costs around $150. Perhaps it's good to have a limited number of songs, though, because the PSP music software doesn't allow easy sorting of tunes by artist, album, or playlist.

The other way to add content is via a new--and of course proprietary--storage format that Sony calls Universal Media Disc, or UMD. As thin as a poker chip and roughly the diameter of a beer can, the UMD can store 1.8 gigabytes of data, enough for a graphics-intensive videogame, a music album with bonus art or music videos, or a standard Hollywood feature film like Spider-Man 2. The UMD discs are housed in a plastic cassette that pops into a slot at the top of the PSP. (They also sometimes pop out of the slot unexpectedly, I discovered.) The cassette does not fully protect the UMD from scratches or dirt, so forget about tossing the discs in a bag. And speaking of scratches and dirt, the glossy finish of the PSP itself is a magnet for fingerprints and blemishes, which explains why Sony includes a protective case and a polishing cloth in the PSP bundle.

Sony has been touting its proprietary Memory Sticks for years, while other consumer electronics makers have embraced Compact Flash, Secure Digital, or other cheaper, higher-capacity formats. Even if you don't have a Sony digital camera, a Sony VAIO computer, or a Sony AIBO robotic pet, you can still add an external Memory Stick reader to your PC for $20 or so, making it easier to move music files and photos from the PC to the PSP. Or you can buy a mini USB cable and connect the PSP to the PC, using the PSP as the Memory Stick card reader.

Unlike the Memory Stick, the UMD is not writable; there's no way to transfer your own music or video clips to a UMD disc as you would to a blank CD. The only way to get music or movies on a UMD disc is to buy it from a music or movie company like, say, Sony. At this writing, only two other movie studios, Lion's Gate and Buena Vista, have announced plans to offer prerecorded movies on UMD, and even then only a handful of titles, appealing mainly to teenage boys.

Part of the value of the Sony PlayStation 2 is that it connects to a TV set or speaker system to serve not just as a game machine, but also as a DVD and audio-CD player. The PSP has no video-out connectors, however, so if you buy a movie in UMD format--Sony says they'll cost $20 to $30 each--the only way to watch it is on the PSP. If you want to watch Spider-Man on the big-screen TV and also on the PSP, count on buying two versions of the same movie. Maybe Sony will include a UMD reader in its DVD players, stereos, or TV sets someday.

Only time will tell if Sony's rivals embrace UMD as a new format for portable movies and music. If Sony sells millions of UMD-based PSPs, perhaps they will. But will millions of people buy PSPs if the selection of music and movies is as limited as it will be this year? It's the new proprietary-format conundrum.

Sony says the PSP will eventually be able to connect wirelessly to Sony's Connect online music store to download music on the go. But for now it doesn't even offer a PSP web browser, so you can't use the PSP's Wi-Fi capability to grab your e-mail. Apparently the ability to connect to a rival music service, an Internet radio station, or an online video service is not in Sony's PSP game plan.

Sony has been humbled by its missteps in the digital era. It didn't calculate on the personal-computer revolution, it didn't hear the onrush of mobile telephony, it closed its eyes to the rise of flat-panel LCD TVs, and most galling, it let Apple's iPod become the icon of the digital music age, instead of the Sony Walkman. Some Sony fans were hoping the PSP would be an iPod killer, but it's not even an iPod wedgie.

In videogaming, however, Sony's PlayStation 2 has been a triumph. And as the portable version of the PlayStation 2, the PSP will instantly go to the top of most gamers' wish lists. For everyone else, I'd advise waiting for PSP 2.