Sony's PlayStation TV Could Be the Ultimate Set-Top Box

Sony (SONY -0.40%) is looking to add to the 75 million Internet-enabled devices it has in U.S. households. The company will release its PlayStation TV globally starting next month. It's been almost a year since Sony launched the diminutive box in select Asian markets under the name PlayStation Vita TV.

The company is calling PlayStation TV a "micro-console," and it's built on Sony's PlayStation Vita portable console architecture. It offers games as well as access to movies, television shows, and music. It most closely resembles Amazon.com's (AMZN -1.90%) Fire TV in terms of functionality, but will also compete with the Roku 3 and Apple (AAPL 0.56%) TV for space in people's entertainment centers.

Although all of the above mentioned options are priced about the same, Sony offers a few extra benefits for the same price.

A complete entertainment system
Sony's biggest advantage over the competition is in gaming. The company's PlayStation line has been around for nearly 20 years.

Since PlayStation TV is built on the same architecture as the Vita, it's compatible with most games built for the portable console. This gives Sony an instant library of nearly 700 familiar titles to entice gamers. The drawback is that some titles might not translate well to the big screen, so Sony will have to be careful which titles it releases to ensure a good user experience.

What's more, PlayStation TV capitalizes on the PlayStation 4's remote gaming capabilities. This allows users to play their PS4 on a second television if the main TV set is occupied.

Perhaps most enticing about the PlayStation TV is that it can connect to PlayStation Now, Sony's cloud gaming service. While still in beta testing, PlayStation TV gives consumers a low-cost entry point into the network. PlayStation Now gives users the potential to sample games for a few hours, or rent a game long enough to complete it. Granted, it's not an optimal solution for sports games or other games with lots of replay value. 

Amazon's Fire TV. Source: Amazon

Compared to Amazon's gaming offering, Sony has a huge advantage. Amazon boasts thousands of games available for Fire TV, but most of these are smartphone and tablet games ported to the set-top box. Sony offers top-notch games, including PlayStation 3 games, and it's working toward the future with PlayStation Now. Of course, Sony could work with developers to get them to port their tablet games to PlayStation TV as well.

Next-gen television
The PlayStation TV could be more than an over-the-top entertainment system. It could be tightly integrated with Sony's upcoming Internet-delivered television service.

Sony plans to roll out a "cloud-based TV service" by the end of the year. The company has already made an agreement with Viacom, but still needs to negotiate deals with the other major content companies to put together a complete package.

Sony is trying to keep costs down because it's not only competing with traditional cable, but other companies will also be entering the Internet-delivered TV space in the very near future. One way to keep costs down is to subsidize the service with sales of a $99 box. With sufficient hardware sales, Sony may be able to undercut the competition's pricing, selling its television service near cost.

Of course, Sony's television service will probably work with just about any Internet-connected device, but Sony can better customize the experience on its own hardware. This was part of the reasoning behind the Fire TV, which prominently features Amazon Prime Instant Video streaming titles. Additionally, getting approved for the Apple TV, the most popular set-top box, isn't an easy task.

Sony is creating an ecosystem of services and devices that all work really well together. The PlayStation TV could drive sales of all of them: PlayStation Now, Internet-TV, game downloads, music and movie downloads, and even sales of its game consoles.

But it has its flaws
Sony's Japanese release of the PlayStation Vita TV last year wasn't perfect.

By far its biggest flaw is the user interface. Sony was lazy here, and it simply ported the Vita operating system to the big screen. This presents multiple problems from a control standpoint because the Vita has a touch screen; your television probably doesn't.

Amazon's Fire TV offers an excellent user experience, as does Apple TV. If Sony can't match the competition, it won't sell well. Ease of use is key, if not a primary selling point, for set-top boxes. That also means Sony will need to be compatible with all of the most popular streaming services at launch, too. Last year, it had issues with Hulu at launch despite advertising its availability.

Fortunately, these are issues that it can resolve. Only Sony has the infrastructure to provide services like PlayStation Now, and it's leading the way in cloud-TV. These are services that Amazon and Apple can't yet touch. The PlayStation TV could be the ultimate set-top box, but it needs to fix its flaws before it can move past Roku and Apple in the market.