Shacknews has learned from a reliable source close to Sony that a new iteration of its PSP console is currently in the works. The device is a successor rather than a redesign of the current system; recent rumors have suggested that Sony is also working on a redesigned PSP. It is not clear if the two rumors are in fact speaking about the same project, but this new report definitely refers to a brand new system. It will have built in hard drive support from the beginning, and will not be using the UMD media format, either for games or for other content. This makes sense, since the PSP is the only device that uses UMDs, and since UMD movie sales have been falling lately, there is little reason for Sony to stick with the format. However, it does appear to rule out the possibility of backwards compatibility. It is unknown what format will be used in its stead. The device, which the source referred to only as "PSP 2," is currently in development, and may appear some time "in the next three years."
Nvidia recently announced that it has a new design contract with Sony, one which will apparently pay more than the company received for its work on the PlayStation 3's GPU. It seems fairly likely that the contract in question refers to this PSP successor, given Sony's history of working with Nvidia on game console technology.
When contacted for comment, SCEA representative Paul Murphy said, "As you know, SCEA does not comment on rumors or speculation."