Many gamers and investors likely believe Sony (SNE +1.43%) will kill off the PS Vita soon.
The handheld console has only sold 8.8 million units since launching in December 2011 -- considerably less than Nintendo's (NTDOY 9.59%) 3DS, which has sold 44 million units, or its predecessor, the PSP, which sold 80.8 million units. The PS Vita was also absent from all of Sony's major press conferences this year, which were dominated by news about the PS4.
Source: Sony.
Sony U.K. chief Fergal Gara recently told Eurogamer that the company didn't plan to kill off PS Vita, but gamers shouldn't expect mature titles like Uncharted or Killzone on the platform again. Instead, Gara stated that Sony was repositioning the PS Vita as a platform for indie titles and games for younger players. In particular, Gara highlighted the potential of new games like Minecraft and Lego Batman 3 to keep PS Vita's sales "trucking along."
While that may be a solid short-term strategy, I believe Sony will abandon handheld gaming altogether after the PS Vita is discontinued. Let's take a look at why that move could help Sony's other businesses grow.
Why the PS Vita failed
The PS Vita failed for three simple reasons -- pricing, features, and games. In 2012, the 3G version of the PS Vita launched in North America for $299, while the WiFi model cost $249. By comparison, Nintendo's 3DS initially launched for $249 in 2011, but only cost $170 by the time the PS Vita arrived.
Today, both the PS Vita and 3DS can be purchased with bundled games for around $200. However, the 3DS continues to win over gamers with its dual screen setup and stereoscopic 3D screen -- two key features that offset its lack of graphical horsepower in comparison to the PS Vita.
But Sony's worst mistake with the PS Vita was failing to secure new deals with Take-Two (TTWO 1.42%) and Capcom, which published four of the five best-selling PSP games -- GTA: Liberty City Stories, GTA: Vice City Stories, Monster Hunter Freedom Unite, and Monster Hunter Freedom 3. Those four games sold nearly 23 million copies combined.
Grand Theft Auto: Liberty City Stories. Source: Take-Two.
Take-Two and Capcom have not released any new GTA or Monster Hunter games for the PS Vita, and their absence is painfully obvious. The top five games for the PS Vita -- none of which were made by Take-Two or Capcom -- have sold fewer than 5 million copies combined.
Lastly, the rise of mobile games over the past four years has taken a bite out of handheld consoles. Research firm Gartner estimates that global revenue from mobile games will nearly double from $13.2 billion last year to $22 billion by 2015. At the same time, the value of the handheld market is expected to plunge from $18 billion to $12.4 billion.
Why the PS Vita doesn't fit into Sony's long-term strategy
Sony clearly believes that gaming in the future will revolve around a single game being played on multiple screens.
Remote Play allows PS3 and PS4 games to be streamed to a PSP, PS Vita, PS TV, and new Xperia Z devices. Cross Play allows certain games to be played on one platform, like the PS3, and resumed on another one, like the PS4. PS Now, Sony's beta-stage cloud gaming platform, streams older PlayStation games to the PS3, PS4, PS Vita, PS TV, and BRAVIA TVs.
PS Vita serves no real purpose within this ecosystem. It can be replaced by an Xperia Z phone connected to Dualshock controller, since Xperia devices can now locally stream PS4 games. Many of the games that Sony is promoting for the Vita, like Minecraft, are also available for Android devices. Xperia devices using Square Enix's Dive In can even play Final Fantasy titles soon.
The Xperia Z could replace the PS Vita. Source: Sony.
Since Xperia devices can play mobile games, stream PS4 games, and will likely support PS Now in the near future, the next logical step is to allow Xperia devices to succeed the PS Vita. Sony's smartphones only account for 3% of the global smartphone market, but that's still a much bigger footprint than the PS Vita's niche of handheld gamers.
Eliminating the PS Vita will also allow Sony to promote Xperia devices and the PS4 together, which should boost the Xperia's brand's visibility while reducing marketing costs at the mobile division, which posted an operating loss last quarter.
A Foolish final word
In conclusion, I strongly believe the PS Vita will be Sony's last handheld. All of Sony's business strategies point to that inevitability, and it would make perfect sense to abandon the dying handheld market in favor of the growing smartphone one.
