Next Generation Portable on sale for 2011 holiday season

Sony is doubling down in the handheld gaming space.

Company unveiled its next-generation handheld system Thursday in Japan, then surprised the gaming world by also announcing a new initiative that will bring games from the original PlayStation to Android-based smartphones and tablets. Both the system and the initiative will launch before the end of the year.

The next generation PSP — currently codenamed NGP (for next generation portable) — will feature a five-inch OLED touch-screen display as well as a second touch panel on the back of the device. It will also include WiFi and 3G wireless connectivity, motion sensors, rear and front-facing cameras and dual analog sticks (like the PlayStation controller).

The visual quality of games on the NGP is said to be virtually on par with the PS3. demos at the event of the device playing “Killzone,” “Resistance,” “Little Big Planet,” “Uncharted” and “Metal Gear Solid 4″ — all titles designed to appeal to the core gamer.

That represents something of a risk, though. While core games result in massive profits in the console world, the modern portable gaming market has historically been less receptive toward them.

“While clearly differentiated from the more casual games that have made the iPhone a phenomenal success as a videogame platform, it remains unclear whether there is mass market potential for high-end portable games,” said Colin Sebastian of Lazard Capital Markets.

Sony did not announce pricing information for the NGP (whose name will almost certainly change before launch). That’s expected to come around E3 in June.

The question analysts have is whether the company has learned the lesson from recent launches. The PlayStation 3 originally cost between $499 and $599 — far out of the reach of many people. And when Sony released an interim handheld system called the PSP Go in 2009 to test the waters of pure digital downloads, it put a $50 premium on the machine without adding any new features. It flopped.

“Their inability to give pricing speaks volumes about where they are right now,” said Michael Pachter of Wedbush Securities. “They’re really, really timid about doing anything now.”

The tie-in with Android — dubbed PlayStation Suite — showcases the rapidly evolving nature of the portable videogame segment and represents a way for Sony to hedge its bets with the new system. Smartphones have become a viable threat to traditional handheld systems.

Sony itself is expected to unveil an Android-based phone with PlayStation controllers in the coming months, perhaps at next month’s Mobile World Congress.

Sony plans to open a PlayStation Store in the Android marketplace and will offer new and original titles that will run on both Android devices and NGP. Current generation games won’t be ported to the phones and tablets, but select titles from the first PlayStation will (though the company did not announce which).

Sony’s announcements come as Nintendo prepares to launch the 3DS, its next-generation handheld system, which allows users to play games in stereoscopic 3D without need of special glasses. (The device will go on sale in North America March 27 for $249.99.)

Analysts have repeatedly said they are concerned that Nintendo, which has historically ruled the handheld space, is not thinking far enough into the future with the 3DS. Single-function devices, they note, are rapidly falling out of favor with consumers.

With the 3DS and NGP facing off, though, their makers are less focused on outselling each other — and instead hoping to fend off the growing threat from Apple.

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