Changing niches – a PSPanic attack?

I haven’t been writing in this space too long, but one thing I’ve been committed to in any of my posts is that in niche marketing, you need to respect your audience, but even more importantly, to really know your audience. That’s why it’s really surprised me to see Sony have a mild panic attack lately with its PSP handheld game system.

The reality is that even though the gaming industry as a whole is extremely mainstream at this point in its lifecycle (which I’ll blog about at a later time), the handheld gaming industry is indeed a niche. While a very wide and diverse audience might enjoy the odd game of NHL 07 or Mario Kart in the comfort of their home, the audience who would seek out a (somewhat large) device to allow them to replicate that leisure experience on the go and in public spaces, is a much more targeted group. And apparently, they’re not the same folks that Sony initially thought they were – a critical error for a company that should be able to afford to find this stuff in.
Having been a leader in the gaming space since the release of Playstation in 1995, it’s surprising to me that the one time industry giant has made so many missteps with the roll out of the PSP. As Advertising Age points out, the PSP has been victim to a number of pitfalls since the all-in-one device’s original launch when its anticipated cool factor was teetering on the brink of iPhone-level buzz. While setbacks such as the graffiti advertising controversy were noteworthy, what was really surprising to me is that Sony simply did not know their audience for this product.

The original target for the PSP was the late 20s ‘urban nomad’, but reality quickly set in as the large frame of the device, its lack of any real functionality such as a phone application or a solid web browser, and its high price point seemed to be barriers to this crowd getting in on the action. Heck, I won a PSP back when it first launched and promptly pawned the thing – it was just too clunky and I really couldn’t see myself carrying the thing around when I already had an iPod, an MP3 phone and a PS2 at home! I didn’t need another device. Especially not one that took up so much space to add so little value.
Trends soon began to show it was the teen crowd who were gravitating to the device and now, after two years in the market, they’re completely shifting their niche to attract an entirely new audience with an entirely different lifestyle. The reality is, Nintendo DS is killing PSP in the market with its small, sleek design, low pricepoint and dedicated gaming-only functionality. They picked one thing, did it right, and talked to the right people about it. As a result, Sony, the one-time undisputed leader in the gaming market is panicking – slashing prices, changing its content strategy and trying to talk to an entirely new crowd. One thing about niche markets, especially those as connected as the gaming community, is that they can smell panic, and Sony is reeking of it at the moment.
So it would seem that Sony killed itself in this race by trying to be all-things-in one, without really providing more value that a distraction at a high price tag. But even worse, they tried to be all things to an audience that they clearly didn’t understand – and that’s like committing niche suicide.

Good luck with the price chop, PSP. You’ll need it.

  • amuscat

    I “heart” my PSP

    When the PSP first debuted I jumped at the chance to own a part of the coolness. Back in the day I had the much-coveted Turbo Express and was slightly addicted to the second colour gaming system. Nothing could have been more cumbersome than that hunk of coolness and it retailed for $299.99.

    Two hundred, ninety-nine dollars and ninety-nine cents is what I paid for my PSP two and half years ago. While perhaps I fit into the niche, good for Sony for providing me with what I had been missing for so long. And while I could go on about the cool attributes my PSP and I radiate, I will spare you the blah blah blah.

    Product niches have expiry dates and while finding that product to fit that space is every MBA graduates wet dream, the reality is that market eventually tires. Through price drops Sony can expand their consumer range and while the cool factor may drop slightly have you noticed the price of games hasn’t? I sure have.

    Perhaps there is an aroma of strategy at work and not the reek of panic. Bleed this product dry before the PSP2 arrives and then start all over again.
    -Late 20’s and still gaming.

  • Steve Davidchuk

    I think you are overlooking one thing.

    The PSP plays movies.

    I don’t know too much about the PSP but about a year ago, I went to a conference where it was discussed that the sales of PSP games was awful. Pathetic even. And the thing that was keeping PSPs going was the movie playback function. Sony was 100% aware of this from initial game sales and user research.

    SO… not to burst your bubble… but the watching a MPEG of Pirates of the Carribean on a GO Train or in a airplane might be the reason why anyone is still buying the thing.

    The higher rez portable movie function is it’s best feature. There really isn’t a better gadget out there right now that does this… iPhone pending….

  • Andrew

    I’m not saying PSP isn’t full of cool features and it doesn’t have a market with 20 year olds. It’s just being outsold by NDS almost 5-1 which indicates some fundamental flaws in the strategy of a company that could once do no wrong in the gaming market. PSP is a great product, but Sony made a mistake by not recognizing they’d made a product that younger gamers would gravitate to, compounded the error by positioning it and pricing it for the wrong audience and are now scrambling to make up for their mistakes.

    As for the “aroma of strategy” – love the reference but “panic” is the sort of aggressive adjective that sells newspapers… or whatever it is I’m doing here….

  • duke

    “without really providing more value THAT a distraction at a high price tag.” Sorry Lane found an error, and as an english teacher, I felt compelled to point it out.