I saw an interesting sign on my way home yesterday:

Denver Bookbinding Company: We do more than just bind books!

This reminded me of the PSP. Here’s why:

Several years ago I interviewed Al Ries. Al is one of the gurus of product marketing. I’d quite enjoyed his books “The 22 Immutable Laws of Marketing” and “The 22 Immutable Laws of Branding”. And I thought he’d be an interesting person to comment on the launch of the Xbox and the Gamecube.

Unlike the rest of the market, Ries predicted that Xbox would beat out the Gamecube in the race to be second place to the PS2. His reasons, as usual, were insightful and based on a set of interlocking premises about how people think when they buy products. The nut of Ries’ insight could be summarized by my bookbinding example.

Think about this sign—what else might a bookbinding company do? And what does this sign actually mean? It was plastered over the side of a building. From the look of the paint, it wasn’t a marketing concept that fared well. I doubt Ries would be surprised. He would say that the bookbinder failed the first test of a product, which is to focus. A product needs to stand for something clearly in the consumer’s mind. And the more focused that thing is on something specific, the better—Ford, cars. Coke, Coke.

If your company is the Denver Bookbinding Company, then you better stand for bookbinding. Anything else you do it probably going to be at best a business =at and much worse, confusing to customers.

If you are the best bookbinder in Denver, when people need a book bound, you want them to think of Denver Bookbinding. You might run the odd copying or printing job. But you don’t want to dilute your bookbinding product brand with a bunch of other services.

Or think about it from the customer side. If you need a book bound, you look in the phone book and figure Denver Bookbinding is a good place to go. (Incidentally, that’s exactly what I did many years ago when I had my masters thesis bound).

If you want something printed, does a big sign that says “we do more than bind books” make you want to do business with them.? Probably not. Better look up Denver Printing Company.

Which brings me to the PSP. I got a note not long ago from Ries pointing out his prescience with regards to the Xbox and the Gamecube and offered another predication—that the PSP wouldn’t beat whatever Nintendo on the market. His reason—Product focus, of course. Here’s the specific line from the email he sent me (which I’ve included below):

“The movie and MP3 capabilities are just wasted. All they do is increase the price. Without then (and at a lower price) the Sony PSP might have killed the competition.”

In his new books (which he wrote with daughter Laura Ries), “Origin of Brands”, Ries extends his basic principles to argue that convergence is a bad business strategy. So, as much as the suits at Sony might like the idea of an all-in-one media device, the market is not likely to respond. Why? It’s the bookbinding problem all over. I might think it is neat that I can watch movies or listen to music on my PSP. But at the end of the day, what am I going to use it for? Playing games.

Sony might as well print on ever PSP box, “We do more than play games!”

We’ve been in this spot with Sony before. The PlayStation 2 is a DVD player, remember? But how many people still use it as one? If you’re like most people, low-cast, high-quality DVD players have replaced the thrill or even the convenience of the DVD support on the PS2. Why struggle along with the PS2 controller to watch a movie when you can drop $50 for a dedicated DVD player?

I haven’t played a DVD in PS2 for years.

At the end of the day, I’m not betting against Sony and I like the PSP. But I will bet that Sony has shot themselves in the foot. A $150 PSP without movies and music would have been a killer app. As it is, we have a beautiful expensive gadget with a built-in PlayStation.

1. At launch, you picked the Xbox to beat the Gamecube in the market. In terms of units shipped, it looked like you were right. In terms of revenue, it seems that Nintendo must have won the financial war--sell fewer consoles but actually turning a profit. What happens if Sony just outspends Nintendo to win market share in the handheld space?

I don't think it's a question of money. It's a question of game value. What will the kids like best, the larger screen of the Sony PSP or the dual screens of the Nintendo DS?

It's going to be close, but I think the Nintendo DS will win. A plus factor for the Nintendo machine is that it's cheaper.

Forget the multimedia capability of the Sony PSP. No kid is going to watch movies on a 4.3 inch screen (and pay $20 or so for the movie) when they can watch it at home on a 30-inch plasma or L.C.D. screen for free.

As usual, convergence is a dud.

All the media stories I have read, however, predict that the Sony PSP is going to be the big winner. The February 2005 issue of Wired magazine and the March 2005 issue of Mobile PC magazine, for example. Both had direct comparisons of the two products.

2 When Sony launched the PlayStation 2, the touted its DVD player capability. But, over time, this feature has not been a big part of the PS2s success. With that in mind, should we really think of the PSP as a convergence device?

Well, it is a convergence device, but it's going to be used as a single-function divergence device. For playing games, period.

The movie and MP3 capabilities are just wasted. All they do is increase the price. Without then (and at a lower price) the Sony PSP might have killed the competition.

3. How much of the market do you think the PSP can achieve? Will achieve?

I assume that the Nintendo DS and the Sony PSP together will have at least 90 percent of the market. If so, then the Nintendo DS will probably get 50 percent and the Sony PSP 40 percent.

One of the reasons why the Sony PSP will even achieve this high a percentage is the incredible amount of media hype the machine has received. It reminds me of the introduction of the Xerox 914 and the IBM PC.

4. What do you think that Sony needs to do in order to grab a significant chunk of the handheld market?

Come out with a PSP without the movie and MP3 features at a lower price.