Is Sony's PlayStation VITA TV a Dud?

The Sony  (NYSE: SNE  )  PlayStation Vita handheld launched in 2011 amid the rise of web and mobile gaming. Its predecessor, the PlayStation Portable, was a success and allowed the company to gain a foothold in a market that had historically been dominated by Nintendo  (NASDAQOTH: NTDOY  ) . While the Nintendo 3DS system got off to a rough start, the PS VITA has been most obviously damaged by the shifting portable gaming landscape.

Sales for the platform have been dismal, and its future viability has often been called into question. The introduction of PS VITA TV gave cause for renewed optimism, promising to breathe life into the VITA platform and improve the PlayStation ecosystem. Now that the device has landed in Japan, what chance does it have of delivering on these promises?

A small victory
The PS VITA TV launched in Japan on Nov. 14, 2013 and helped to propel total weekly VITA platform sales above total Nintendo 3DS platform sales for the first time since its March price drop. The Vita's rise in the charts was also aided by the release of God Eater 2, which captured the top software spot for the week of its release. The 3DS routinely outsells the VITA so any reversal is seemingly good news for Sony, yet the VITA TV's sales indicate that the device will not be a game changer.

On release week, the VITA TV is believed to have sold approximately 42,000 units, bringing total platform sales to approximately 88,000. In the subsequent week, VITA TV sales dipped to approximately 8,000 units, with total platform sales at approximately 29,000 units. Consider that sell-through percentages put Sony's initial shipment at 140,000 units and it becomes clear that supply constraints are not an issue and that it will take time to sell the initial batch.

That the Vita TV is not a bigger success has to be worrying for Sony. The company's PSP sold over 80 million units worldwide and was a huge hit in Japan. Despite the fact that the system became something of a haven for piracy, it managed to attract significant third-party support and helped to spring a number of successful franchises. The PS VITA TV represented Sony's attempt to bolster the PSP's successor and cater to Japan's handheld-centric gaming market while also moving it in a new direction.

Set-top boxes and streaming have yet to catch on in Japan in the same way that they have in the rest of the world, and marrying an entrant with the PlayStation brand seemed to make good sense. Now, it is looking increasingly likely that Sony will have to accept that the VITA TV may be viewed primarily as an accessory for the PlayStation 4.

Trouble in the homeland
Sony's decision not to release the PlayStation 4 in Japan until February 2014 shows how much the Japanese gaming industry has changed since the last console cycle. This also means that many of the PS VITA's most interesting features are currently inaccessible. Additionally, it's worth pointing out that a substantial number of VITA's biggest titles are not playable on VITA TV due to a lack of touch screen input. This may be remedied through patches and PlayStation 4 controller support (the Dual Shock 4 features a small touch pad), but it gives reason to doubt the VITA TV's current value proposition.

The movement of Japanese developers to mobile ventures represents a serious threat to Sony and Nintendo. The Wii U is a failure in the territory (the system's flagship Super Mario 3D World recently debuted to disappointing sales) and it remains to be seen whether the PlayStation 4 will be able to revive the country's console market.

In many respects, the Japanese industry lags behind the technological and design advances that have been made by Western studios. The transition to HD development turned a great number of Japanese studios into ineffectual shells that had to rely on appealing to niche tastes to survive. Large-scale game development became too risky and smaller titles were better fits for mobile platforms. Even Nintendo's relatively successful 3DS has seen an evaporation of third-party support.

Regional market divergences
With the broader Vita platform underperforming globally, the continued rise of mobile and tablet gaming, and looming questions as to whether or not consoles are viable in Japan, Sony's gaming empire is at risk. Even with the introduction of VITA TV, lifetime platform sales will fall drastically short of what PSP accomplished.

If Japan is truly as averse to console gaming as recent trends would indicate, outselling the PlayStation 3 becomes a much more difficult proposition. The regional problems facing the company suggest that its gaming model may not be sustainable. The diverging tastes of Japan and other markets will make it increasingly difficult to justify expensive hardware and software development.

Which game studio is one of the Fool's favorite growth stocks?
Tired of watching your stocks creep up year after year at a glacial pace? Motley Fool co-founder David Gardner, founder of the No. 1 growth stock newsletter in the world, has developed a unique strategy for uncovering truly wealth-changing stock picks. And he wants to share it, along with a few of his favorite growth stock superstars, WITH YOU! It's a special 100% FREE report called "6 Picks for Ultimate Growth." So stop settling for index-hugging gains... and click HERE for instant access to a whole new game plan of stock picks to help power your portfolio.


Read/Post Comments (0) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2756181, ~/Articles/ArticleHandler.aspx, 10/23/2014 4:14:36 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement