Sony refused to embrace MP3, insisting on using their own ATRAC codecs, this is what killed their walkman brand. Some of their early players were very attractive and resonably priced but when people reailsed they had to re-encode or re buy their exisitng MP3s they lost interest. Apple came along and made something trendy to morons with too much cash, which there seems to be a hell of a lot of. It was never the best MP3 player on the market and still isn't.
Regardless of that, how sony market the next psp is anyone's guess, the psp has failed to excel in any area so they have nothing to build on. The DS has found its niche, one that will probably guarantee Nintendo success for generations of future hardware. I dont think Sony can just clone the DS and stick a better CPU in, everyone should know that even if its technically better than the DS, the next DS will probably have some new 'gimmick', as well as playing all your old DS games and new DS2 games.
I don't think they have a hope to be honest. I own a PSP and while I have played a fair few games on it, I doubt I would buy a PSP2, if some of their current userbase aren't even interested in a new machine, what chance do they have of expanding thier market?
I think one area they have a chance to grow would be mobile phone gaming, a standardised and decent gaming service on all sony mobiles could be a double wammy for them. As Apple themselves are proving, people are willing to pay silly money for (under specced) phones, at a similar price with incredible gaming capabilities could be their best option.
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