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Sony will launch a video download service for its PlayStation Portable [PSP], likely in the first quarter next year. The service could challenge Apple's iTunes. iTunes, meanwhile, has been part of a heated debate whether its sales are slowing. Sony's new service, reportedly developed by Sony Pictures but unconfirmed by Sony, only works with the PSP (for now). First, a video has to be downloaded to a PC and then transferred to the device on a memory stick. Sony-SNE-Apple-AAPL-1yr-chart-12-15-06 Current PSP owners don't need any hardware upgrades, but may need to purchase a larger memory stick. To date, Sony has sold more than 20m PSPs globally, and is reportedly negotiating with download services such as Amazon, Movielink and CinemaNow. However, sales of disc-based movies formatted specifically to play on the PSP have not exactly been popular. Strategic Analytics estimates global sales of video downloads will total $298m this year, jump to $1.5b next year, and reach $5.9b by 2010.
• Sources: Financial Times
• Related commentary: Apple's P-to-P Movie Downloads To Eclipse Wal-Mart and BitTorrent, The Apple iTunes Debate Rages On, Wal-Mart To Launch Movie Downloads in 2007, Blockbuster Considering Downloads; Cuban: PCs Not HD-Ready, Microsoft's HD Movie Downloads: Not Yet Ready For Prime Time. Conference call transcripts: Sony F2Q06, Apple F4Q06
• Potentially impacted stocks and ETFs: Sony (SNE), Amazon (AMZN), Netflix (NFLX), Movie Gallery (MOVI), Blockbuster (BBI). Competitors: Apple (AAPL)

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Source: Sony to Challenge Apple -- Will PSP Video Downloads Bear Fruit?