PSP didn't have a killer-app like Pokemon either and that managed to sell 75m......

All it really had that was comparable was Monster Hunter in Japan.

"Best emulator device ever" is what I've heard from many PSP owners.  Steal all the 8 and 16 bit games and it easy to see why someone would own a PSP.  Throw in a decent amount of good PSP titles on top of it.

So making the Vita with low-end graphics would magically make it sell like the 3DS and give it popular games like Pokemon and Animal Crossing? 

Your logic is flawed. If anything, the high-end graphics on Vita give it a chance to have a greater variety of games than the 3DS. It's all up to developers to make games for it. 

But they won't use Android because of piracy and because they would lose PSN sales, Android games are free or 99 cents compared to PSN. Would people buy a Sony smartphone that doesn't run Android?

Nope, I'm not saying that.  I believe KHlover put it best in this thread.

"Well, it was pretty obvious from the beginning, wasn't it. Nintendo has established its position in the handheld market over and over again, with titles especially developed for them (given the same care as the games of their "main" console). Most devs don't put that much effort into Vita games, with obvious results."

Are you implying that's the only reason people bought the PSP? 

I don't have to say it.  Just look at its software sales.

@OP

Depends who you're referring to. I agree that at the moment the Vita appeals to far too few people. There are some unique games and even some superb ones. However those games mostly appeal to the hardcore.
For instance I knew going in that I had to have Uncharted Golden Abyss along with Gravity rush. Unfortunately those games don't compare with the mindshare of a franchise like Pokemon or Monster Hunter especially within the mobile gaming space.

Than there is the value perception. Though I obviously think that the Vita is easily worth its price, most others evidently believe it is still too expensive.
On top of the problems regarding mass appeal games and cost you have to consider the increased competition from other handhelds entering the market as well as from smart phones and tablets.

So in the end you have multifaceted problems facing the Vita and the thing Sony should do IMHO is go back to their strengths and that is to make sure that major successful portable IPs are available on the Vita and exclusively if possible. The Vita is still in its infancy and Sony must do all it can to foster mindshare. And they must do so immediately.

GTA seemed to be a big hit. When I look at PSPs sales I see a platform plagued by piracy, like you mentioned above, it was a big selling point right?

You would be suprised how many people ask me what uncharted is and how good it is when they are buy the ps3 bundle that comes with it. LittleBigPlanet was popular but its agian not very popular with the common consumer.

I work at a best buy in the video gaming department so thas where the "asking" part comes from.