By Prince McLean

Published: 09:00 PM EST

Sony plans to lure iPhone developers to the PSPgo, a revised version of its PlayStation Portable handheld gaming platform, and copy Apple's low App Store prices to create demand for the relatively expensive new hardware, according to a gaming industry report.

The article, published by PocketGamer, indicates that Sony plans to deliver a library of online PSPgo games for download through its PlayStation Network at prices of 1, 2 and 5 Euros, similar to Apple's iPhone apps, as a way to create interest in the new PSPgo hardware, which is expected to cost $250 or £230 (UK prices are not currency equivalent).

The original PSP, unveiled in 2004, was similarly priced at $250 in the US and attempted to sell both games and movies on Sony's proprietary UMD optical media for around $25-$40. Sony later enabled the purchase of online games for around $20 each.

The UMD format never really took off for movies, and sales of the PSP have languished behind the more popular Nintendo DS. Since 2004, Sony has sold around 50 million PSPs while Nintendo has created a DS installed base of over 107 million over a similar period.

Attack of the iPhones

More recently, the PSP has seen new competition from the iPhone and iPod touch, which offer gaming as a secondary feature to web browsing, email, media playback features, and on the iPhone, serving as a mobile phone. In just over two years, Apple has developed an installed base of 45 million devices, 100,000 registered developers, and 65,000 apps according to COO Tim Cook in the company's Q3 2009 conference call.

By matching the price of iPhone apps, Sony hopes to stay in the game. The company faces some real challenges in making that happen, including enticing developers away from the already proven iPhone market to sell to a new installed base of PSPgo users.

At the same time, Sony already faces resistance from its existing developers, with Activision CEO Bobby Kotick threatening to drop support for the PS3 and PSP if Sony didn't lower its hardware prices. Sony insists that it can't lower its prices and still remain profitable.

Developers, Developers, Developers

Sony must also convince its developers to target projects that can be profitable at such a low price. That will also require a smaller cut of software sales for Sony, which has historically levied a much higher cut from its game developers than the 30% share Apple charges in the App Store.

All of the game console makers expect to earn significant cut of software revenues, and Sony and Microsoft have historically relied on this income to cover losses when selling their hardware. Only Nintendo has consistently sold its hardware at a profit.

In contrast, Apple makes almost all of its revenues from hardware sales, enabling it to levy a smaller cut of software sales to support iTunes operations. The company has repeatedly stated that it aims to operate iTunes at a break-even point, investing its profits into expanding the store's features.

App Store Approval

"Sony isn't taking a leaf out of Apple's book when it comes to easing the process of publishing, however," the article noted. "[PSPgo] Games will continue to go through formal console-centric Technical Requirement Check (TRC) requirements, as well as a two week quality assurance testing period. Sony will also actively control the release schedule for games, although considering the current disquiet over Apple's laissez faire attitude to app approval and release, this might not be a bad thing."

The gaming industry's general perspective that Apple's App Store approval process is cheaper, simpler, and easier for developers in comparison to the status quo in console gaming might come as a shock to iPhone users, who are regularly bathed in reports of complaints from iPhone developers ranging from the length of app approval to the $99 cost of signing up in Apple's iPhone development program.

Sony currently requires developers to pay for a very expensive set of tools and hardware to create PSP games. Despite an 80% drop in the cost of its development tools made this summer, Sony's PSP software development kits still start out at $1000 to $1500.

After witnessing the success of the iPhone App Store and particularly its appeal to independent small developers, Sony hopes to woo iPhone indie developers into porting their apps to the PSPgo rather than focusing on a few large developers to create gaming titles.

However, Sony will also face competition for attention from Google's Android, Nokia's Symbian, Palm WebOS, and Microsoft's Windows Mobile and Zune platforms, all of which are actively courting iPhone developers' attention in similar hopes of replicating Apple's success in selling mobile apps online.