DFC Intelligence have a very interesting article up that covers Sony's risky pricing strategy with the PS3. Well written and well worth a read. DFC Intelligence is a strategic market research and consulting firm focused on video gaming.

On the surface it seems like the PSP has been a huge success. By the end of fiscal 2006, Sony announced they had shipped over 17 million PSP systems worldwide. This was comparable to the Nintendo DS shipments at almost twice the price. However, underneath the surface the PSP seems more about style than substance. The system truly excels at none of its functions. Meanwhile, the DS seems to be really expanding the market where the PlayStation brand had been dominant. Titles like Nintendogs and Brain Age add the type of product diversity that drove over 100 million consumers to buy each of the first two PlayStation systems.

Right now, the Nintendo DS is having some of its strongest success in Japan, while the PSP holds its own in North America and Europe. However, Japan's trend conscious consumers are often a harbinger of worldwide success. In the 1990s, Nintendo's business in Japan started to decline faster than it did in North America. Could the PSP's performance in Japan be a harbinger of things to come for Sony?