SCEA’s Peter Dille spoke about the growing piracy issue on the PSP recently to Gamasutra. Dille talked about how third party developers were ready to jump off a year-and a-half ago. However, with education and a paradigm shift in approaching handheld games, third-party developers were ready to get back into the game.
The PSP has been selling phenomenally across the globe, but the software sales have not matched the hardware sales. This has been attributed to an increase in piracy. However, blockbuster games like GTA, Crisis Core, and God of War still managed to sell millions of units. The problem may be a combination of quality, quantity and piracy.
One way to reduce the piracy on the PSP is to support the homebrew community. The PSP currently has one of the biggest homebrew communities out there. A cursory glance at sites like QJ.net ((pfft dcemu

Believe it or not, most people that hack the PSP do so for the homebrew capabilities but gets sucked into piracy because it’s so easy once the PSP has been hacked. Even some of the most influential PSP hackers delivering hacked firmware on a regular basis seem to be against piracy while being for homebrew software.
If Sony is able to bring firmware updates that support the creation of homebrew applications while preventing piracy, then this could be the needed catalyst to reduce the issue. As Dille said, most people are inherently honest and want to do the right thing, Sony just needs to take the temptation away from the average consumer.
http://gamer.blorge.com/2009/04/23/h...cy-on-the-psp/