Will Sony Ever Learn?

I'm starting to think that Sony (NYSE: SNE  ) wants its newest portable game console, the PlayStation Vita, to fail. In addition to the problems fellow Fool Rick Munarriz previously noted, the company has now saddled the console with yet another of Sony's expensive, proprietary memory formats.

Another day, another dead format
I get the logic behind Sony's addiction to making devices that store data on widgets it's invented in-house. Owning the format can create an extra revenue stream, while helping to lock customers into your products. For example, during the early days of Apple's (Nasdaq: AAPL  ) iTunes Store, you could only listen to your purchased music through iTunes or on an iPod. If you wanted to switch to another mp3 player, you had to burn your music collection to audio discs, then rip them using another format, find some quasi-legal software that did the same thing, or buy the music again.

Unfortunately, Sony can't seem to get anyone else to adopt the storage formats it launches. We've already seen its Betamax videotapes, Minidiscs, Memory Sticks, and pint-sized Universal Media Discs (or UMDs) fail. The company has found some success with compact discs and Blu-rays -- but it jointly developed those formats with Philips and Pioneer, respectively.

Behind the times
Beyond Sony's history of failures, I see a bigger issue. Requiring consumers to purchase expensive memory packs for their consoles has become outdated. Nintendo's (OTC BB: NTDOY.PK) 3DS ships with a 2GB memory card in the widely used SD format, and Microsoft (Nasdaq: MSFT  ) now allows gamers to supplement the Xbox 360's storage with standard USB flash drives -- although it recommends that gamers buy SanDisk's (Nasdaq: SNDK  ) special Xbox drive.

Designing your device around an already popular memory format allows users to increase the value of their devices without having to shell out too much extra money. Many gamers probably already have a spare flash drive or SD card lying around. Even if they have to go out and purchase a new SD card, it will still cost significantly less than Sony's memory.

Card Size

Sony Memory

Sandisk SD

4GB $29 $6.38
8GB $42 $11.66
16GB $71 $21.95
32GB $124 $52.47

Sony also didn't give the Vita any built-in memory. Want to download music and games? You'll have to buy one of Sony's cards. This essentially raises the price of the Vita by a minimum of $30. Given that Nintendo had to lower the price of the 3DS from $250 -- which is what the Wi-Fi Vita will sell for -- to $170, it seems unlikely that many consumers beyond the hardest of hardcore gamers will bite for Sony's pricier gizmo.

A shrinking market
I'm not the first Fool to say this, but I think Vita will fail. I'll admit that it looks like a nifty piece of hardware, but I believe that tablets and smartphones will eventually swallow the portable gaming market. The casual games available on the platforms are good enough to satisfy most consumers, and cloud gaming services like OnLive and GameStop's (NYSE: GME  ) Spawn will win over core gamers. In the end, there'll be no room for handheld game consoles -- especially if they're shackled to overpriced storage formats that no one wants to buy.

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The Motley Fool owns shares of Apple, Microsoft, and GameStop. Motley Fool newsletter services have recommended buying shares of Microsoft, Apple, and Nintendo; writing covered calls in GameStop; and creating bull call spread positions in Apple and Microsoft. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Patrick Martin does not own shares of any of the companies mentioned here. You can follow him on twitter @TMFpcmart03. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On September 16, 2011, at 9:45 PM, Risky88 wrote:

    I think part of the whole tablet problem is and why other companies cant seem to compete with apple is that they are not leading, just following.

    In my opinion my computer does way way way more than any tablet, not to mention the overall graphics.

    Companies need to put out what people actually want and put it out as the next big thing.

    Apple puts out a product that everyone thinks is the next big thing. But look at their phones. Don't even have 4g yet or the fastest processors. not to mention that if you want to edit a file or music its a huge hassle than if you just use windows.

    I don't mind bashing apple becuase I tried their ipod and hated it. But their stock is making me money so I don't really care.

    Follow their steps but take the lead, dont be like rimm who just sits on their butts hoping tomm is different

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