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So many factors to consider here.

First, pricing. $40 for DL portable games is asking too much for all but the most "big budget" efforts (for portable games).

Second, if the platform starts as a DL only, with ALL PSP2 games available from the very beginning through PSN or whatever the PSP online service is called, there won't be a split market like there is between the vast majority UMD PSP user base and the secondary PSP Go user base.

Third, efforts to keep costs under $200 should be a major priority if they want to see widespread acceptance. I'm just not convinced that a marketing plan for a "premium" priced hand held is going to be accepted just like that. A $250 bundle wouldn't be outrageous, but it would have to be an attractive "value" bundle.

Fourth, maybe there will be a fair amount of effort given to quick turnover "minis" that are priced accordingly (on par with iTunes Store games).

And as for this demand for physical media, I find it REALLY hard to believe that anyone is really that attached to the UMD format, arguably the WORST format ever conceived for a portable system.

Swappable media for portable gaming is no longer necessary at this stage and is really nothing more than an inconvenience for actual gaming on the go.

If that many people are so attached to the idea of having a physical token that represents their game, SCE may as well sell game cases at retail outlets with nothing but game manuals inside with voucher codes printed on them.

And of course, the two analog nubs are a given. Better yet, just make the control layout like a DS3.