Yes, the $249.99 price tag is outrageous, and that alone should have rendered the PSPgo stillborn. For comparison, a PSP 3000 retails for $169.99 by itself, or in bundles, usually with a game and Memory Stick, for $199.99. What does the PSPgo offer for that $50-80 premium?
Well, to be fair, the PSPgo package does include everything needed to get a new owner going immediately. The price difference is perhaps attributable to the 16GB of internal flash memory. Weighed against the cost of 16GB worth of Memory Sticks, that's actually not bad, but only because Sony has always sold space at an inflated price by enslaving its devices to its proprietary card format.
Speaking of which, the PSPgo is not even compatible with the old, overpriced Memory Stick Duos used by all previous PSP models. No, now you need Sony's new, overpriced Memory Stick Micro. So any current PSP owners hoping to "upgrade" will have a hell of a time trying to transfer over their old data and downloadables. Never mind the fact that those Memory Stick Duos, which were pretty much only useful for the PSP, would become largely worthless.
Of course Sony made it clear that they were not targeting current owners when they decided, not only to remove the UMD drive, but also to offer consumers no program to transfer over their existing UMD libraries. So, yeah, those few loyal PSP fans who have been steadily building up their UMD collections really have no incentive whatsoever to support this new model, which is essentially a new platform with no backwards compatibility but which, unlike the DSi, also does not offer any new model-specific games.
But what about all those downloadable games, demos, and "Minis" for the PSPgo? Isn't the entire (selling) point of the PSPgo that it runs completely free of physical media? Certainly, most of the press surrounding it has highlighted its importance as the first dedicated gaming platform to operate strictly via digital distribution. I don't doubt that the future is one free of physical media, and I guess some are hoping that, if the PSPgo succeeds, it will bring that future about sooner.
But the thing is that, even if you think you're done with UMDs, you don't actually need a PSPgo to enjoy that digital future. Amid all the hype about the PSP catalog going downloadable on the PSN, what may not be so widely known is the fact that anything you can download to the PSPgo can also be downloaded to any of the old PSP models. So the PSPgo is only removing options, rather than adding any. It's actually closer to the useless Game Boy Micro than to the DSi in how it "improves" upon its predecessor.
In summary, the PSPgo does not support UMDs, does not support Memory Stick Duos, and costs $50-80 more while offering no exclusive content. It's also not compatible with any old-model cables and adapters, instead requiring brand new proprietary USB cable, TV OUT cable, etc. In other words, for current PSP owners, it would be like paying $249.99 to start from scratch. Moreover, combined with the egregious price tag, Sony's failure to offer any upgrader incentive program in the US basically amounts to a slap in the face to any PSP enthusiast who might just have been excited about trading up to the newest tech.
Even for new consumers looking to pick up their first PSP--and there are some good games out there and on the way--my honest recommendation would be to just get a PSP 2000 or 3000, or even consider waiting for a potential 4000, which I don't think is outside the realm of possibility. The PSPgo is smaller and sleeker, yes, and one admittedly cool addition is the Bluetooth connectivity, which allows players to play using their PS3 controllers. But I don't think the advantages come close to outweighing the lethal combination of high price and reduced feature set.
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