The service, which will cost between $50 and $70 per month, is only available to PS3 and PS4 owners in New York City, Chicago, and Philadelphia. Sony will add iPad support in the future, but it hasn't announced expansion plans for other cities yet.
Sony is clearly trying to capitalize on the rise of cord-cutting across the U.S., but PS Vue has three big weaknesses that customers and investors shouldn't ignore.
1. It's overpriced in a saturated market
First and foremost, PlayStation Vue is expensive. The $50 "Access" package includes over 50 local broadcast TV and cable channels. The $60 "Core" package adds BTN, TCM, the Golf Channel, and regional sports channels. The $70 "Elite" package includes Boomerang, Logo, CMT, VH1 Classic, and Fox College Sports.
By comparison, Netflix (NASDAQ:NFLX), Amazon.com (NASDAQ:AMZN), and Hulu Plus offer unlimited streaming of TV shows and movies for just $8 to $9 per month. Next month, Time Warner will launch HBO Now for $15 per month.
CBS offers a $6 per month package for live and on-demand programs, and Comcast will launch a similar service for NBC for about $3 per month by the end of the year. DISH Network's Sling, which offers live streaming of nearly 20 networks, costs $20 per month. Apple (NASDAQ:AAPL) is also reportedly planning to launch its own streaming service with roughly 25 channels for $30 to $40 per month.
In addition, PS Vue is more expensive than basic cable packages, which cost an average of $55 per month, according to research firm SNL Kagan. That high price tag could prevent the service from gaining traction among cord cutters.
2. A ridiculously narrow market
Netflix, Amazon, Hulu, and CBS can be viewed on a wide variety of cheap streaming devices, but Sony is limiting PS Vue to owners of PS3 and PS4 consoles in three metro areas. Vue won't even work on the PlayStation TV or the PS Vita, which is strange considering that the PS Now cloud gaming service works on both platforms.
Sony is clearly testing the waters first before taking the plunge. If the market reacts unfavorably to its uncompetitive prices, the company can readjust its pricing tiers before launching PS Vue for iPads. If PS Vue fails, Sony can fall back on the PlayStation Store, which sells and rents TV shows and films to PS3, PS4, and PS Vita owners. That a la carte model, which the iTunes and Google Play Store also use, is easier to manage than complex negotiations with TV networks.
However, if Sony is serious about PS Vue making an impact, it should quickly broaden its coverage area and launch for the PS Vita and PlayStation TV. Sony could also add the service to its Web-enabled smart TVs.
3. No support for Disney networks or premium channels
PS Vue notably lacks access to all Disney (NYSE:DIS) networks, including ABC, ESPN, the Disney Channel, and A&E Networks. Since those channels are all included in basic cable packages from Comcast and Time Warner Cable, customers might wonder why they should pay a comparable amount for a less complete lineup. Sling, which costs much less than Vue, already lets users stream Disney networks.
Apple recently ran into a similar problem with its rumored streaming service, which isn't expected to include Comcast's NBCUniversal channels. Comcast previously threw all sorts of roadblocks in the way of cord cutters -- including throttled connections and blocking access to HBO Go from select devices -- so denying Apple access to its channels wasn't surprising.
But it was surprising that Sony reached an agreement with Comcast but failed to do the same with Disney. PS Vue also lacks access to premium networks such as HBO and Showtime.
In my opinion, PS Vue is a miscalculated "me-too" effort that half-heartedly tries to address into the cord-cutting market. It costs too much, is crippled by hardware restrictions, and has gaping holes in its channel lineup. If Sony is interested in streaming media, it would be better off promoting the PlayStation Store's media arm instead, since direct sales of Sony films, TV shows, and music go straight into its pocket.
Leo Sun owns shares of Apple and Walt Disney. The Motley Fool recommends Amazon.com, Apple, Google (A shares), Google (C shares), Netflix, and Walt Disney. The Motley Fool owns shares of Amazon.com, Apple, Google (A shares), Google (C shares), Netflix, and Walt Disney. 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.