A common refrain I’ve been hearing on video game podcasts and reading in internet gaming forums is the question, “Why is the PSP Go, Sony’s new handheld gaming device, so expensive?”
On the surface, the decision to price the device at $249.99 — $80 dollars more than the previous iteration of the hardware — is inscrutable. After all, the PSP Go arguably has less functionality than the current PSP on the market. The PSP you can buy now can play games downloaded from the PlayStation network (something that the Go focuses on to the exclusion of all else), yet it can also play all the games and movies released on UMD since the PSP’s 2005 launch. The Go has a smaller screen; it doesn’t have a UMD drive assembly; it has a smaller battery; and it’s based around the same technology that Sony’s been mass-manufacturing since 2005. The only significant additions are the 16 gigabytes of internal flash memory and support for Bluetooth connectivy, additions that shouldn’t significantly increase the manufacturing costs.
[[image:090612_pspgo.jpg:Time for a second job:center:0]]
Compare this to the recent hardware iteration from Nintendo in their flagship portable device. Unlike the Go, which is best described by relaying what it can’t do — namely, play discs — the conversation around the DSi is all the new things it can do. And on top of that, it isn’t nearly a hundred dollars more expensive than the previous version of the hardware.
There is a simple reason that the PSP Go is so comparatively expensive, though, and it can be summed up in a single word: margin. The PSP Go is a device built around digital distribution, but the device itself obviously can’t be delivered digitally. A frequently cited analogy in the world of retail is to compare things to razors and razorblades. The person who invented the razor gave it away for free, but got rich selling replacement razorblades. This is how the video game console business normally works: the video game consoles are sold at or below cost, and the companies make their money selling the video games and accessories. For example, you can buy a new Xbox 360 for $199.99, but to add a Wi-Fi antenna or hard drive costs an additional $100.
[[image:090612_razor.jpg:A razor for gamers! How convenient!:center:0]]
Sony can’t use that model with the PSP Go because no retailer would sell it. From the perspective of retail, this is a razor where the consumer never has to come back for replacement razorblades. Why would Amazon, Wal-Mart or GameStop sell a device they make little or no profit on if there are very few opportunities for the add-on sales that normally make selling game consoles profitable?
The high price of the PSP Go is a concession to retail. The cost you pay is significantly more because no retailer would carry the device if their wasn’t a much bigger profit margin than there is for the average console.
It is an unfortunately reality of digital distribution that even as Sony releases a device where once you buy it you aren’t going back to the store in order to get new games and you certainly aren’t reselling the games you’ve previously purchased, those stores that are getting taken out of the loop are the places Sony must rely on in order to get the console into their customers hands.