Culver City (CA) - After fighting stagnant sales of its PSP handheld for several months, Sony is now working on a video download service that it hopes will pose a real threat to the iTunes video store, and also rebuild interest in the portable gaming system, according to a Financial Times story.

The new service would allow users to download video content through a proprietary Sony platform, which could then be transferred to the PSP via a Memory Stick. To back up the service, Sony is also bringing out a 4 GB stick, which could hold about 10 full-length movies.

Sony is reportedly in talks with Amazon, Movielink, and Cinemanow, working to strike a deal with them to gain access to the vast library of titles available on those services. iTunes, on the other hand, is working on securing videos by itself, and so far has only scored Disney for its feature film channel.

Sony already has a similar battle with iTunes. Its Connect music download program, which also lets users transfer songs to the PSP, has played the second fiddle to Apple's service, though it has offered some actual competition for iTunes. Some of Connect's features that are unavailable for iTunes include saving files in different formats onto a CD and the ability to re-download any song purchased. It is unknown if the video download service will be integrated into Connect or if it will be an entirely new platform.

One other advantage Sony has with a first-party download service is that the company has strong divisions in both TV and movies, opening up a huge library of videos that it can pull from its own internal departments.