Sony's Delay Dilemma (SNE)

It sounded like an April Fools joke written by Nintendo executives. But the news is true – Sony SNE may be forced to delay the worldwide release of the next PlayStation Portable, tentatively titled NGP. When Bloomberg spoke to Jack Tretton, president of Sony Computer Entertainment of America, he put a familiar spin on the news: a delay in certain regions could give developers more time to complete their software. Please stand by for exaggerated excitement. Oh yes! Now there's no chance the launch titles will end up like this game. Or this game, because publishers always take the time to release products that consumers desire. They never attempt to cash in on the early adopters of new technology. Excitement concluded. Resume editorial. The cold, hard truth is that delays do not guarantee better quality products. Just because developers have more time does not mean they will be allowed to use it; publishers who were counting on a timely NGP release may not wish to spend additional money on their projects. Even if they do, that still does not mean the games will be good. In its defense, Sony has a legitimate reason for announcing the possible delay. The disaster in Japan has not only hurt the country physically but economically as well. Many of the NGP's parts were likely being made (or were going to be made) in Japan. This puts the company in a very difficult position. But let's not kid ourselves: Sony is not oblivious to the financial benefits of a global economy. You know all those stories we keep hearing about emerging markets and the dollar-stretching beauty of China? Sony has been listening to them for several years now, which is why many of its electronics are already being manufactured in China. I'm not here to argue in favor of this business practice – far from it. In fact, I would rather that Sony manufactures its awesome electronics in Japan, and that Apple AAPL manufactures the iPhone in America. But that isn't going to happen anytime soon. As long as there is a financial advantage, corporations will continue to go to China for its manufacturing needs. Thus, it is somewhat surprising (if not a little odd) that Sony was not prepared for a disaster of this magnitude. Are you telling me that there aren't other suppliers in other nations that can't replace the NGP's components? Forget China – scour the entire world. If Sony looked hard enough, I'm sure the company would find what it needs. Unfortunately, Sony does not seem to be in search of component replacements. The NGP is still several months away, and instead of announcing that the company is feverishly searching for a way to ensure that the system can launch on time, Sony sent one of its top executives to break the depressing news. “It may be the straw that says ‘maybe we get to just one market by the end of the year,'” Tretton told Bloomberg. Translation: “Unless you live in Japan, don't expect to play the NGP this year.” No, Tretton would not specify which regions would face the delay, nor would he say which one would be the lucky recipient of an on-schedule launch. But the NGP's future is not hard to predict. Sony is a Japanese company, and it sent the president of its American branch to an American-based publication to make this announcement. This is a serious problem for Sony, a company that is once again lagging behind Nintendo by default. The Nintendo 3DS is now available in all three of the major territories for video game sales: North America, Europe and Japan. At best, Sony had planned to release the NGP in the fall. That gives the Nintendo 3DS a 6- to 10-month lead, depending on when the NGP was supposed to be released. But Nintendo's three-dimensional handheld may only represent half of Sony's troubles. As it stands now, the NGP is the ultimate iPod Touch-killer; it does everything the iPod Touch can, features a touch pad underneath the system, and will offer better game content than the current iPod Touch could ever hope for. Its graphics processor is also much, much more powerful. (Never mind the numbers and specification mumbo jumbo – the proof is in the actual games.) The NGP features six buttons, two analog sticks and one directional pad, making it much more of a game system than the iPod Touch. Its screen is bigger than Apple's AAPL device, and if the original PSP is any indication, the NGP's screen could prove to be the most impressive on the market. While the final price has not been announced, Sony insists that it learned its lesson after pricing the PlayStation 3 too high. Rumors suggest that the standard NGP will retail for $250, while the 3G version will go for $350. One month ago, this was terrible news for Apple. By pricing the device within the range of the iPod Touch, Apple had no hope of winning over the core gamer market. But the truth is that the casual market – the one Apple thinks it has won – is just as vulnerable. If Joe and Jane Consumer see the NGP at Best Buy BBY, marvel at its features, and accept the price tag (whatever it may be), they won't be buying the inevitable iPod Touch 5. They'll get an NGP instead. Or at least they would have. By delaying the NGP, Sony is telling its prospective customers to look elsewhere. But really, they are already looking elsewhere, because Sony failed to meet their needs with the original PSP. Sony still has the chance to win back those consumers. It still has the opportunity to compete with Nintendo, to cut into the iPod Touch market, and to reclaim its title as the leading game company. But just as Nintendo learned with Nintendo 64, delays are not the way to pull it off.