well, personally, i think yes, they will loose the backwards compatability, but on the other hand, maybe they can still emulate the older systems (so you could by gba games for the new console).
sony is entering this market, not to have a piece of it, but all of it.
this is pure marketing.
they want $$$.
if you were a business, would you wanna take a huge risk by entering the market, without wanting it all?
they are aiming to get all of it, even if that's virtually impossible. what they most likely will get, is more than half of it, cause nintendo have proven themselves to always drawing the short straw.
If the PSP is really good and has lots of cool features, and nintendo comes out with a better console a year after that, sony will still own most of the market, since people have already bought the psp and are not willing to spend more cash on a new system, when the psp works good and has more games.
what nintendo needs to do, is to get a CD-drive for their new handheld and hopefully as good hardware as the n64, or better, with gba/c/m and NES emulation.
this would result in a huge price for the machine, and unless the nintendo machine comes out before the psp, nintendo will loose this round.
after that, it's byebye nintendo!
nintendo should also target their audience at all ages, or maybe even at 15+, cause that's where the real money lies.
10 years ago, the only gamers would be kids growing up with the games, but this has changed, and unless nintendo realises that the money lies in the older generation, nintendo will be left behind.
sooooo... in order for nintendo to succeed
nintendo machine should be released earlier than psp
should have backwards compatability to all their other handhelds (or at least the GBA)
and must be priced reasonably.
good luck on that one!
if they actually can pull this off (which they're most likely not to), they would be back in business, leaving the psp behind.
i know it sounds crazy to pull this off, but this is just what they might HAVE to do, to be able to survive.
it's tough times!