When I first heard of Sony and Google's partnership, I immediately said "That's a brilliant move by Sony". When I first heard of the PSPhone, I immediately said "Sweet, with Android linkage and PSN it will be popular for those that only want to carry one device". When I heard of Sony's NGP and its specs I initially said "FAIL - This will be too expensive and will sell worse than PSP".
However, this morning I was thinking this all through and a question was presented to myself. Why do I think the Android and PSPhone are great and yet don't recognize the reasoning behind Sony going so far upmarket with its NGP? What you are about to read is certainly Sony's path for the few years. This path will enable Sony to prolong the life of the PS3, even when its competitors announce NGC's (Next Generation Consoles) by E3 2012.
1. Android
This all starts here. Here Sony creates a backbone to their devices that is open source (i.e. free), stable, and immediately offers a user base over 100m (Android 2.3 or higher will easily be 90% plus of the Android user base by holidays).
2. PSN and PlayStation Suite
Sony knows that its not hardware that will create profits in the long run, its software. As such, these Android Market portals allow Sony to takes its software and distribute it to an immediately massive user base. It can take the older software and generate money from sales and/or ads if it wished through the millions of Android devices out and yet to come. This also acts as a constant advertising point for PlayStation specific hardware if the consumer decides that it wants to try out the more robust or potentially newer/exclusive titles on gaming centric consoles.
For developers they get a massive development platform where they can create one game that will not longer be constrained to one device or multi after significant porting costs. Instead they will be able to create a moderate game with the new tools that the consumer can play on hundreds of devices that run Android. OR if this is a more robust HD game, they will have the capability to offer it on the PS3 and NGP only. This makes the PlayStation platform have a great potential for ROI as well as a strong argument for exclusive rights for Sony.
3. PSPhone
This gives Sony two distinct avenues. A smart phone/crossover device that hits those who want decent portable gaming but do not want to carry more than one device. Additionally, it is a good entry level product as it will be priced at carriers with contracts, thus greatly reducing the entry price barrier.
4. PS3
This is now a profitable hardware base with a solid user base. It will be upgraded to an Android backbone by the end of 2011 to allow it to be fully intertwined with Sony's new networks and the plethora of apps available on the Android Market. Sony will want users who buy the PSPhone to crave this gaming at home and its interoperability between Android apps and PSN/PlayStation Suite products and then purchase a PS3 along with its specific gaming software.
5. NGP
This is the final connector. Where I initially saw fail due to its obvious anticipated high price, I should have seen perfect up-market bridge device. You see, the price conscious consumers will stick to the PSPhone and what it offers, while those core-gamers and tech-savvy consumers will jump to the NGP. What they will get is PS3 games on the go and all their Android options. True cross platform... on PlayStation devices.
Summary
This is what I think Sony is doing in 2011. It intends to create a massive playground with three tiers for the consumer and a strong argument for 3rd parties to focus solely on its PlayStation Suite environment.
For portables, this could hurt the 3DS in that unless the dev sees a big reason to want 3D or simply hit Nintendo's user base, it can stick to the PlayStation Suite and hit a 100m plus users day one. For home, this allows the PS3 to immediately have a dramatic increase in available software from all other devices and Android apps. This in turn, creates more value and allows a longer life for a higher or simply sustained pricing structure. It also allows Sony to push HD game development by 3rd parties to be exclusive as it can pitch PS3 and NGP, similar to how X360 uses Windows (PC) as a pitch.
Personally, I can't wait to see this play out. I will stick to Android devices, though maybe not the PSPhone, and I do have a PS3. Its a brilliant move by Sony to combat the rise of cheap gaming on smart phones as well as provide a strong incentive to developers to offer exclusives on their PlayStation products. We all know that were the content resides, that's where the majority of people put their money into the hardware.
Keep in mind, that while the PSP sold 1/2 of what the DS did, it was still over 60m sold (better than any other non-Nintendo hand held) and very profitable for Sony. If PSPphone and NGP can do the same, it will have a direct effect on the rest of Sony's console business and of course massive software sales generating tons of cash for Sony.
Sony may remain last in these hardware sold tally's, but they will dramatically increase their profitability.
