On backwards compatibility: Jack explained that Sony looked at how to "not take a greater hit on production cost, without losing PlayStation's heritage ... Hardware / software for backwards compat wasn't all that expensive. ... but we're selling PS2 software to PS2 customers, and selling PS3 software to PS3 consumers." Still, Jack seems to feel like it may have been the wrong move. "I would like to have had it in there, but Sony's collective strategy determined we could afford to lose it. We've now gone down that road, and we're not going back."
On DRM and the video store: As of right now, Tretton is a firm supporter of the need to DRM content on the PlayStation platforms, and Sony believes that "the drm for a song maybe isn't as important for a movie and a game... this is way too hard a business to make money in to allow people to own multiple copies for the price of one." (That's what they all say!) "I'm all for allowing an individual consumer having the freedom to do with their content what they want," but Sony has no intention of opening its video up any more than it has to.
On drive or flash storage: Sony has "definitely thought about storage on the PSP," and understands the inevitable "march towards digital content delivery device." But in terms of a drive-based PSP, they have "nothing that's imminent." (Read: don't hold your breath.)
On how downloadable video affects the already sad state of UMD: UMD "has struggled, and it wasn't handled effectively from the beginning. ... I firmly believe in a digital model" as they're rolling out, but Sony is "still going to support UMD" as a device for movies.
What's preventing PSP software sales: Three things. Title ports from PS2 games (people don't want to buy the same title twice), and the PSP's media functions. But Jack put the most emphasis on "piracy in the hundreds of thousands of units are preventing software sales. it's a problem that affects our software sales right now."