Sony is to gatecrash the fledgling market in handheld devices to play downloaded video content early next year when it launches a service for the PlayStation Portable.

The decision, which could threaten Apple Computer’s grip on the video download market, will allow PSP owners to download a film from the internet to a PC and then to transfer a single, legal version of the film to a Sony device.

Sony, which has sold more than 20m PSPs worldwide, expects to launch the service in the first quarter of 2007 after tying up deals with online video providers.

Crucially for Sony, the service will not require the launch of a new PSP or for consumers to buy new hardware.

The new PSP service has been developed by Sony Pictures Home Entertainment and will use the Japanese company’s memory stick technology to store the video content. Sony is distributing a 4Gb memory stick capable of storing 10 feature films. and film download sites such as Movielink and CinemaNow are in talks with Sony about signing up to the service. But the PSP service will not be compatible with Apple’s iTunes store, the dominant film download platform. Only iPod devices can download content from iTunes.

Only Walt Disney has made its films available on iTunes. Hollywood’s other studios have been reluctant to join Disney because of concerns about piracy: unlimited numbers of iPods can download copies of films that have been bought on iTunes and then downloaded to a PC.

Mike Goodman, a digital entertainment programme manager with Yankee Group, the research firm, said Sony’s PSP decision would “open the [video download] market up” for Sony.

Although the video download market is still immature, the industry is forecast to grow at an exponential rate during the next five years.

Global revenue from online video sales will be $298m this year, says Strategic Analytics. The technology research firm expects the market to grow to $1.5bn in annual revenues by the end of 2007 and to $5.9bn by 2010.

With Sony Pictures Entertainment producing film content in Hollywood and DVD sales growth slowing industrywide, Sony is keen to establish a strong position in digital delivery of film content.

Sony has had a difficult year. Launch of the PlayStation 3 suffered hitches. The group sold fewer than 200,000 units in its first month. It had intended to sell 400,000.

The problems led Sir Howard Stringer, chairman and chief executive, to describe the company as facing “a perfect storm”.

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