Overview: This guide will quickly explain how to create your own custom thumbnail .THM files for your PSP movies/video files. This assumes you have your movie/video file(s) in the appropriate PSP format (psp mp4). This guide explains how to do this with Photoshop, however the main thing is image size and format itself (Width: 160px x Height: 120px, Resolution: 72 pixel/inch)
Required programs/items:- Video/Movie file converted/encoded w/PSP Video 9 to PSP format
- Image/Photo to be used as thumbnail
- Photoshop 9 or above
Maybe your like me and a custom-nerd, meaning you gotta have things your way. Well, i wanted my video files to have a nice movie/cover art thumb vs the default one that PSP Video 9 create. So i searched around and found a site that had some info and thought i'd share it here.
Here's an example of my Hackers movie and a custom thumbnail I created for it.

Step 1. Create your thumbnail using Photoshop. Try to create at Width: 160px x Height: 120px, Resolution: 72 pixel/inch, since this is the size we will the saving the jpg as.
Step 2. Once your done with your image, in Photoshop, go to File > Save for Web Then in the Save For Web box, change the settings in red and then click Save. 
Step 3. Finally, we will need to rename the .jpg file we just created to be the same file name as the movie but with the .THM extension. So for my Hackers movie, the movie name that PSP Video 9 gave it is:
M4V10044.MP4 and also it created a M4V10044.THM file.
We want to delete that M4V10044.THM file and rename our .jpg to M4V10044.THM (its the default thumbnail created for the movie by PSP Video 9, the movie name we use in PSP Video 9 gets saved into the MP4 itself)

Then just transfer the movie (be sure to keep your MP4 and THM files together) to your PSP and Voila, your own custom Movie/Video cover art!
NOTES: if you can not rename your .jpg to .thm, you might have to turn off a "hide file extensions for known file types" in Windows. Do this by: Open Windows Explorer. Go to Tools > Folder Options. Then go to the View tab. and Uncheck the "Hide extensions for known file types" (see below)  by seamonkey420
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