Look at other download only platforms like the Iphone, and it's app store, and itunes. Yes, download only does work.

However, its a product that costs $500 stand alone and $200 with a contract and serves a different primary purpose.

Sony can't sell their products with contracts and people, as already proven, won't buy a portable product in the scale of an iPhone or DS if it costs much more than $200.

In order for Sony to make retailers want to use the space for a digital content only device and potentially add a kiosk as someone else mentioned, the device must be able to make adequate profit for the retailer. That's what the games and accessories did previously.

If the games are only on the PSN, then the retialer is better off supporting the 3DS (assuming it takes game disks) and putting very little support behind the PSP2.

So, Sony would be forced to make sure the margin is decent as well as make a little profit for themselves. Then based on these rumors it would seem the PSP2 will be priced relatively high, thus repeating their relative failurs on the PSP and PS3. (I say relative as in the end both are/will be profitable ventures, however they both lost by a large margin to Nintendo in market share and units sold)

The important time is not how long it takes to download a PSP2 game but how much you have to download before you can start playing it and how long that takes. For instance if you have a 1GB game but only have to download the first 120MB before you can play for 25 minutes then the important timespan is not how long until the download completes but how long before the download is playable.

Is the market ready? Well I say that it is. ~20% of the market for handheld games is in the iRange of gaming/media handhelds and that is growing rapidly. Twice as much money was spent on the iRange of handhelds than was spent on the PSP last year IIRC. The fact that the other 80% is physical media based is possibly more an artifact of the fact that the other popular systems don't support direct download. Physical media doesn't make sense for handhelds given the more games you carry the less your system is actually portable.

If PSP2 is gonna be download only, I might just buy a PSP-3000 afterall and forget about the PSP2. I'm not a big fan of buying used myself (I bought two used games in the past 2 years). But not having access to rentals and not being able to resell your games is a big minus for me (I have collected a lot but seeing as how most of my games are collecting dust on the shelf after I beat them or got bored of them, it's time to start selling them through ebay. If that doesn't work out, I'm gonna try goozex. GameStop trade-ins are a rip-off).

they could if the direction they changed to is not what some are expecting:

Xperia X10 Quickly Becomes NTT DoCoMo’s Top-Selling Smartphone

Let’s face it: no one was all the impressed with the Sony Ericsson Xperia X10. No multi-touch, Android 1.6, and interface issues all seemed to add up to an all around sad Android from SE. Then again, apparently no one in Japan reads Android blogs, as Barclay Capital is reporting that the X10 — known simply as the Xperia in the Land of the Rising Sun — has become the fastest selling smartphone on the Japanese carrier NTT DoCoMo. The X10 racked up an impressive 120,000 handsets sold in the first three weeks after its April launch.

This sales rate topped an unspecified HTC Android phone that only moved 80,000 units in the 10 months since its launch on DoCoMo, and even bested the figures of the 32GB iPhone 3GS (though we will assume it didn’t quite overtake the combined sales with the 16GB model).

Regardless, the X10 is in high-demand, with its first few shipments selling out quickly and more on the way. Now just imagine if Sony Ericsson released a killer Android 2.1+ device in the Japanese market…sheer pandemonium!

Android: [check]

"We took a very sophisticated PlayStation middleware and shrunk it to fit the Android OS": [playstation portable function added to android check]

Playstation portable new direction?[ ]

I think its a very strong trend that this may be the "new psp2"

Xperia sales versus DoCoMo's previous smart phones

Xperia 120,000 in 20 days
HTC Android 80,000 in 10 months
Blackberry Bold 60,000 in 14 months
Toshiba Windows Mobile 60,000 in 10 months'

I like having all my games with me all the time but I hate not having game cases. Sadly, there is no solution to my problem( that is feasible ).

Price?

1. Its primary focus a phone, somethign pretty much everyone must have.

2. Its price is subsidised by the carrier like all smartphones, thus making it far more attractive.

I really don't see how this compares to my arguement you quoted.

the point is why must there be a "playstation portable 2"?

the point is everyone want's to see how sony is going to cope with the market against apple and Nintendo. being the main one's everyone in the Media seem's to harken about what is sony going to do.

at

this point would it be wise to keep trying to compete on a hardware by hardware basis or keep what you have on the market right now and move the PSP platform to not just a dedicated hardware device but on multiple hardware device's ..

like a smartphone!

the Xperia10 connext's to the PS3 soon their software stack the PSN for download of Playstation portable game's on those smartphone's which Sony is using Android as the OS and put the xmb Running alongside the Android OS could be exactly how they are going to change the PSP platform.

smartphones sell just fine with software download app's only. PSN will allow them to sell more app's to those Smartphone's

It doesn't have to be.Your idea sounds interesting. What about the games? Sony needs to ensure all hardware with PSP platform can play PSP games. Also, I'm not sure about the apps that you mentioned. Where would those apps on PSN come from? What would make consumer purchase from PSN instead of Android app store (or whatever it's called)?

In addition, while the sale of Xperia X10 in the first 3 weeks is impressive, I don't think it will go on to sell 15 million units in Japan in 6 years. Not to mention the success on the worldwide market. What works in Japan might not work in Europe or North America.

For me, Sony needs to decide what kind of market its future iterations of the handheld will compete in. Is it gonna be in the phone market or in the handheld gaming market? It would not be at Sony's advantage to release a device that competes in both market. Even with your idea, Sony needs to decide if they want to be like Apple (the OS is only on its own devices) or Google (put the OS on any devices they can find).