Disclaimer: For the purposes of this thread, I'm focusing on the WiFi model and ignoring the 3G model as it's rumored to being destined to be discontinued.
I think most people who own a Vita, including myself, can agree on one thing: It's an awesome device with some great games.
I also think most people, whether they own one or not, can agree on this: The Vita, and its memory cards, are too expensive.
To avoid this being just another "Vita needs a price drop" or "Vita memory cards are too expensive" thread, I wanted to offer and solicit some theories on Vita pricing. The first puzzler is the fact that according to a January 2012 article at Joystiq--which was before the Vita launched in the US--the Vita costs $160 to make:
If it only costs $160 to make, then why price it at $250? Of course this is a business, and businesses are trying to make profits, but it's hard to justify such a prohibitive price point to maintain such a large profit margin of $90. So why then?
Often lost in the analysis of the price of goods is the cost of research and development. Though those costs are unclear to us, those, in addition to manufacturing, are a big target of accounts payable when a console launches. Another is marketing. Though marketing for the Vita has had its criticisms, the costs are still there.
Looking back to the launch of the PS3 and the current state of Sony as a company may help provide some theories. The PS3 famously (or infamously) launced at "599 US Dollars", incredibly at a loss as the PS3 was estimated to cost over $800 to manufacture at launch in 2006. The PS4 has had some speculation about actual manufacturing cost, though most analysts seem to agree that Sony is not selling it at a loss at $399. This shift in the approach to console launches most likely has something to do with a shift in the company direction over at Sony, who has had its share of financial troubles as a whole, regardless of any successes or failures from the PlayStation brand. For a company struggling to get back to profitability, making a profit at console launch seems to be a step in the right direction.
This explains launching the Vita at a profit, but doesn't explain the size of the margin. Everyone (justifiably) complains about the price of the Vita's proprietary memory cards. They most likely exist in the first place due to the rampant piracy seen on the PSP, but I have a hard time believing they cost hardly anything to manufacture, which means Sony is making a great profit on those too. One could argue that if the latter point is true, Sony could drop the price of the Vita as much as $100 (a $10 loss according to early 2012 manufacturing estimates), and still make a profit on the Vita "bundle" with the profits from memory cards. Conversely, they could drop memory card prices and keep the Vita price where it is, or a combination of both (The option that probably makes the most sense). I think most would agree that a $200 WiFi Vita and a $50 32 GB memory card would sell significantly better than the current model.
Was Sony banking on the Vita to be a savior of years of losses in other areas of the company, were the R & D costs simply that high, or are our interpretations of the numbers just wrong?
Sony has claimed that Gamescom in August is "going to be a PS Vita show", so we'll see what is in store next for the expensive, yet incredible handheld its faithful supporters love so much.
In the end, I don't know the answer, though I'm interested in other theories.