Report: New Sony PSP smartphone on the way

There have been rumors for a while, but now Engadget is reporting it actually has seen an upcoming prototype of a Sony PlayStation smartphone. And they have pictures.

The report says the phone will probably run Android 3.0 and could be out before the end of the year, although Sony is currently holding a “no comment” stance. The phone reportedly uses a 1GHz Qualcomm MSM8655 chip and includes 512MB of RAM, 1GB of ROM, and a screen somewhere around 3.7 to 4.1 inches.

In the photo, it appears the screen will be touch-sensitive, but the phone also sports a touchpad in the center of its slide-down controller section, which replaces a keyboard with PSP controls. It also has a slot for microSD cards, but not one for Sony’s ubiquitous Memory Stick, which is what PSP owners are currently saving games on.

A spokesperson from Sony Computer Entertainment Europe told games website Gamesutra that the images were fake before the “no comment” curtain came down over Sony. While both SCEE and Sony Ericcson have the same Sony parent company, they are disparate units within the organization. Meanwhile, Engadget is standing behind the truth of its story.

The company may claim the phone is “rumor and speculation,” but it’s no secret that Sony’s latest model of PlayStation Portable, PSP Go, has not been doing too well. Sony recently cut the price of the machine again to $199 because the units aren’t moving. Sony also slashed its shipping plans for the Go this year from 15 million down to 10 million. It was formerly priced at $245, more than $70 over a standard PSP, and is lighter and offers downloadable game support instead of using PSP’s UMD game discs.

Another major problem is the fact that Apple’s iPhone is eating up the portable gaming market. According to a report by Flurry Analytics, Apple’s revenue from games leapt up to $500 million in 2009 – which is about a fifth of the total $2.55 billion spent on portable gaming in 2009. Meanwhile, the PSP’s share of the portable market was cut from 20% in 2008 to just 11% in 2009.

Where PSP and PSP Go appeal to ‘true’ video gamers who are familiar with the products and with Sony’s gaming brand, iPhone users tend to be more casual, picking up smaller, simpler games for less money. But there are far more iPhone owners than there are PSP owners.

The solution, as far as Sony is concerned, seems to be this PlayStation Phone it claims doesn’t exist. With Engadget possibly letting this uncontrollable cat out of the bag, we could see Sony cutting its marketing losses and announcing the phone pretty much anytime.

That would probably be for the best at this point – Sony needs to start leveraging its gaming know-how and experience toward the phone market as soon as possible. The PlayStation brand is crazily well-known all over the world, so Sony shouldn’t be downplaying the fact that it wants to make a gaming phone, it should be shouting about it. What’s great about the iPhone craze is that, while iPhones are drinking Sony’s PSP milkshake, it’s also adding a huge number of people to the portable gaming market who never would have been there otherwise. Easy-to-use iPhone apps are creating gamers out of people who’ve never picked up a controller before and never had interest in video games to begin with.

Sony needs to tap those people on the shoulder and offer them something just as easy to use, but better than what they can get on the iPhone. The PlayStation Phone seems poised to do that – its processor and RAM compliment already far outstrip the current PSP. The phone is technologically more powerful and Sony has the gaming experience to offer new players a spectrum of games. With a pitch like, “You can still get your tilt-based, pick-up-and-play casual games on the PlayStation Phone, but you also will have access to games you could never play on iPhone,” the PlayStation Phone could be the catalyst to create an entirely new market of video gamers that Sony could see trickling into its console brands through this new entry point.

So here’s hoping the PlayStation Phone is the real deal and Sony uses it to its full potential. We video gamers are always looking for new converts.

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