Sony's (NYSE:SNE) gaming division has been on a roll lately. The strategy, development, and marketing behind the PlayStation 4 have allowed the company to position the device as the early favorite to dominate the console hardware space. The company has even found a degree of success in positioning its struggling Vita handheld as the go-to device for indie gaming and securing niche Japanese support.
The PS Vita TV is evidence that the company plans to continue supporting the Vita and that it understands the importance of creating a thriving ecosystem for its platforms and services. The Vita TV improves Sony's ability to continue competing with Nintendo (NASDAQOTH:NTDOY) in the handheld space and to combat the moves Apple (NASDAQ:AAPL) is looking to make in the gaming space with Apple TV.
New strategies, changing markets, and sticking it out
When Sony first announced that its Vita handheld would launch at $250, matching the then-current price of Nintendo's 3DS, many speculated that Sony had the opportunity to further the market share gains it had made with the PSP. Of course, that was before the new realities of a mobile-driven handheld sector were fully apparent.
Since then, the 3DS has gone on to enjoy considerable strength on the back of high quality Nintendo software, while the technologically-superior Vita has struggled to find an audience outside of Japan. The 3DS has received the majority of Nintendo's attention and development resources, while Sony's best studios have remained focused on the PlayStation 3 and its soon-to-be-released successor. The feature set of the Vita TV might allow the broader platform to succeed without the attention of top tier studios.
Little box, big potential
The PS Vita TV will launch in Japan this year, with an expected 2014 release in European and North American territories. It will carry a price point of approximately $99, or $149 for a unit that includes a Dual Shock 3 controller and an 8GB memory card. The box will allow users to play Vita software that doesn't require touch-pad support, in addition to a wealth of other games from the PlayStation family.
The PS Vita TV also has substantial streaming functions and will expand the capabilities of Sony's PlayStation 4. The Vita TV can wirelessly connect to a PlayStation 4 to stream games and other content, effectively enabling users to add PlayStation 4 functionality to another television in the house for only $99.
Perhaps most exciting is that the PS Vita TV will support Sony's Gaikai streaming service, which will launch in 2014 with a library of PlayStation 3 games. The Vita TV allows Sony to extend the PlayStation 3's relevance, breathe life into the Vita platform, make the PS4 a more capable beast, and branch into new territories.
Taking a bite out of Apple
Sony Computer Entertainment CEO Andrew House has already stated that the device is being positioned to break into the Chinese market in 2014, and the device's release schedule makes it obvious that Japan is a priority. The Vita TV also has major strategic potential in Western territories.
For years, there have been rumblings about Apple carving a bigger slice of the gaming pie with the Apple TV. That big push has yet to happen, but that doesn't mean it's not coming. The company has already reshaped the handheld gaming sector and it has an apparent interest in dominating the home entertainment space.
Unfortunately for Apple, the company's aversion to buttons means that its gaming potential is limited. There are only so many genres that can be adequately represented with a touchscreen interface. Apple will likely need to bundle a dedicated controller with the Apple TV if it hopes to make its set-top box a disruptive force in gaming.
Still, there is no room for arguing that Sony is in a better position than Apple from a holistic standpoint. Apple reported $6.9 billion in profit the previous quarter and is set to announce its latest results on Oct. 28. Like Nintendo, Sony's outlook is complicated by the effects of yen fluctuations. Both companies stand to benefit from a weak yen, but it is also true that the importance of mobile manufacturing and the locations in which it takes place are complicating the traditional formulas for determining the impact of currency strength. Sony's CEO Kazuo Hirai recently pointed to falling emerging market currencies as a major concern for the company. As PlayStation sales have declined, the company relied on weak yen windfalls and smartphone gains for its posted $35 million first quarter profits. Nintendo has also been aided by Japan's Abenomics, posting an $88 million profit despite declining sales.
Building ecosystem and brand
The PS Vita TV isn't perfect. The device may find itself burdened by its use of Sony's expensive proprietary memory cards, or even negative associations with the Vita brand.
That said, the device does not exist in isolation, and its presence on the market makes PlayStation stronger. Whether or not the PS Vita TV lives up to its considerable potential remains to be seen, but the device indicates that there is sound vision behind the PlayStation brand.
Keith Noonan has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. 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.