Why Everyone Should Be Watching the PSPgoS

Video games stored on a disc of plastic and tucked away in a case are approaching extinction.

You can quibble about the when and the how of this happening, but the inevitability of games being sold online like music, free of their plastic prisons, is certain.

The first real sign of that step away from games sheathed in cardboard and plastic sold in a bricks and mortar store hit earlier this month in the form of the PSPgo.

Sony's latest Playstation Portable is a smaller, sleeker system that has no way of playing a physical game on it. There is no disc drive of any sort, instead there is internal memory, a wireless internet connection and a virtual store run by Sony.

"This is an interesting step to test the waters on a digital only product," Eric Lempel, director of Playstation Network Operations, told Kotaku. "We are thrilled and completely cognizant that this is the platform for a digital gamer.

"It's a really exciting time."

While gamers can visit the Playstation Store directly on their Playstation Portable or PSPgo, the PSP has to store its games on Memory Sticks, while the PSPgo has 16GBs of internal memory and still has the ability to store titles on Memory Sticks. Top-tier games can take up half a gig to one a half gigs of memory each.

The Playstation Store currently has about 100 PSP games available for download with hundreds more in the pipeline, Lempel said. To purchase a game, you just need to find it and download it directly to the device. The sale is automatically charged to a credit card or taken out of credit which can be purchased at retail stores.

Both the PSP and PSPgo can also display pictures and movies and play music. While the online store both rents and sells movies, it currently doesn't offer music. That's something that could change in the future, Lempel said.

"It is something we have considered and are looking at," he said. "It's a natural fit, but there is nothing to talk about right now."

Sony faced quite a few hurdles in launching their download-only gaming platform. Some retailers, which make a bulk of their money off of game not hardware sales, were reluctant to carry the device. And game publishers had to be convinced that the games, no longer on a physical disc, wouldn't be open to greater piracy.

Under Sony's system, games have to be "activated" after they have been installed on a PSPgo or Playstation Portable and can only be installed on a total of five different PSPs or PSPgos in their lifetime.

Those steps, Lempel says, helped convince third-party publishers that their device was a safe bet.

"We're seeing everyone on board with the PSPgo," he said.

While the $250 PSPgo is a download-only device, Sony isn't putting all of their eggs in one basket. Sony Worldwide Studios head Shuhei Yoshida told Kotaku that the company intends to continue its support of the $170 Playstation Portable, which allows gamers to download and play those same games or use the device's built-in UMD drive to play games.

Moving forward, he said, new games will be released in both the UMD and digital formats. Sony was sure to make it as easy as possible to release a game in both formats, Lempel said.

"It's not that hard to do, but there is some work involved," he said.

The hope is that games will hit both the retail store and Sony's online Playstation Store at the same time and for the same price.

The decision to not drop the price for a game that doesn't have the added cost of packaging and distribution may not sit well with gamers, but Lempel says Sony is comfortable with the decision.

"Right now there is no price difference," he said. "We feel (the games) are competitively priced and that there is a ton of content across the spectrum.

He added that a price drop for digital games in the future is possible.

"We're always looking at our business model."

The online store does have lower-priced, simpler games available for purchase. These "minis" cost $10 or less, take up less than 100 megs of memory and can't have multiplayer or network functionality.

Publishers can also decide they want to place their bigger titles on sale, Lempel pointed out.

"We've done a good amount of sales on the Playstation Network in the past," he said.

One stumbling block for the new platform could prevent current Playstation Portable owners from upgrading to the new handheld.

There is currently no way for a Playstation Portable owner to transfer their library of UMD games to the download-only PSPgo. Yoshida told us that Sony "seriously looked into solutions" but that legal and technical issues prevented them from coming up with a system that would work.

Lempel says that the biggest issue was not just about the games, but rather the game's music and other royalty issues.

To try and make up for that, Playstation Portable owners in Europe who upgrade to the PSPgo will get three free download games. Currently, there are no such plans for potential upgraders in the U.S., Lempel said. He did add that new bundles for the PSPgo could be heading for the U.S. in the future.

While the PSPgo gives gamers the convenience of instantly purchasing games online without having to leave their homes and the ability to carry many of those titles with them without the need of extra discs, the device is a much bigger win for publishers and Sony.

If successful, the PSPgo and it's download-only service completely kills the ability for gamers to sell off their titles or buy used copies of games.

A quick check of the top ten rated games for the Playstation Portable found that half weren't yet available in the Playstation Store and of those that were, only one was cheaper than the various stores and services that sell games used.

The PSPgo is driven by an interesting concept, and has a better design than its predecessor, but to succeed Sony has to drop the price of the handheld console and digital copies of games and should actively court publishers to have regular sales on their titles. Sony should also launch digital rentals of games and push gamer loyalty programs that reward frequent shoppers.

And why wouldn't they?

Used games, next to perhaps piracy, is a publisher's biggest concern. Moving gamers away from a system that supports the resale of titles, with nothing going into the pockets of publishers, is likely one of the video game industry's top priorities.

But to do so with little to no reward for the consumer will alienate gamers and inevitably kill this first test of a download-only platform.

Four publishers and a retailer did not respond to requests for interviews for this story.

Well Played is a weekly news and opinion column about the big stories of the week in the gaming industry and its bigger impact on things to come. Feel free to join in the discussion.