Sorry to break it to you, but your calculations are incorrect, as they do not take into account a very important factor: MOMENTUM.

Monster Hunter 4 being announced as an exclusive for 3ds was one of the biggest blows any system has received so far (that I can think of. Maybe equal to Final Fantasy 7 (?) skipping n64 and being released on psone exclusively). The psp did extremely well not only because of the people who bought monster hunter 3/unite, but the momentum that the psp got. Especially in Japan where people use their handhelds a lot in public (trains, buses) and schools, the psp got free advertising. People saw it as a cool item to have (just like the Wii/ Guitar Hero) thanks to word of mouth. Even if they weren't interested in Monster Hunter, they bought a psp because their friends did. Especially teenagers tend to act like that.  

Correct me if I'm wrong, but mh4 was announced as an exclusive even before the vita launched and on the day of its launch, a port of a mh game was released on 3ds. This destroyed any momentum or hype/excitement for the vita. Why buy a vita when you can buy a 3ds which has Mario, Pokemon AND Monster Hunter. Even people who were not interested in any of those titles, suddendly thought lowly of the vita. It got the "it has no games" reputation and the sales plummeted. 

It is possible that had MH been announced as an exclusive for psvita, the psvita would have much better than now and the 3ds far less (though still ahead comfortably). Yes, it's all speculation and we will simply never know, but dismissing this situation as  "basic math" is silly to say the least.

I think that's a large part of what happened. Even if you don't care about Monster Hunter at all (like me!) it still matters a lot because the game that made the PSP has flown the coop, and that really changes your image of the whole product. Just like how consumers who didn't care about Final Fantasy had to take the PS1 more seriously because of it, either directly or indirectly since that kind of a thing is a also huge signal to other publishers and developers.

It's still baffling to me that Sony just sat there and let such a thing happen. They bothered to get all this feedback on what third parties wanted out of a handheld, but they didn't bother to actually sign any games. The thing about being dangerously reliant on third parties is that you have to make sure they're going to show up, but after the PS1 and PS2 I guess they just took it for granted that they would. Still, the PS3 should have been a wake up call. The PS3 had it bad enough without even really losing any games. It only had to share them with the 360. But at a certain point in the process Sony had to know that the Vita had nothing concrete... and they launched it anyway.

I'm more concerned with Japanese devs being ok with having sequels regress in production values purely to get it onto a platform with a higher install base or to cut development costs in general. I don't want to play Persona 5 on iOS.

Well first off, that's not true.   Capcom creates a lot of gaming hardware, just not hardware that's sold directly to consumers.

Secondly, a loss of customers for sony only logically means a loss of customers for Monster Hunter.  You can debate how many customers would be lost, but the fact that there would be a loss of customers is undeniable.

As for how burned people were by the PSP... Vita's sales speak to that compaired to what they were before PSP.  It's just that obvious and undeniable.

You keep wanting to assume that those monster hunter users would be in a different hypothetical box, but that's a highly suspect position considering the very size of the box.   I mean, you really think Vita sales would of more then doubled, and that nearly everyone who owned a PSP wanted Monster Hunter?  That's just ridiculious.

Sorry, but I think we're at an end here. That is not even close to what I've said anywhere, and I can't keep repeating that the Vita doesn't need to sell the same 20 million units as the PSP for Monster Hunter to sell on it what Monster Hunter's going to sell anywhere. You think it does, but I disagree.

I do think it's absurd to say that the Vita tanked because people felt burned by the PSP. The 3DS initially tanked because it was overpriced and had no games, not because people weren't happy with the DS. The Wii U is tanking for similar reasons, not because people hated the Wii.

Edit: Since it came up, I looked out of curiosity and it seems Capcom last proprietary arcade hardware was released in 1996.

How do you think Dragon Quest fans feel?

Can't wait for that Breath of Fire 6!

That's the point though, you disagree.... but you're wrong.

Does it need to sell 20 million units?  No... but it needs to sell a hell of a lot closer to 20 million then it does 5 million the Vita has in sales now.

Attachment rates like you are talking about just don't exist outside of heavily bundled titles and launch titles.  (Though because of limited supply the launch titles have small numbers of sales.)

I mean, how much do you think the new port will do?  Will we see a sudden pickup of vita hardware starting next week?

I guess that's why I don't think it's so out there. The Vita is basically in a launch like state as it is. The audience isn't big enough or diverse enough that such a massive title would end up selling to only 10% of the install base or something like that. So if Monster Hunter fell out of the sky onto it tomorrow, you'd have a situation where it's poised to have launch like attach rates. And if Nintendo hadn't hilariously cut the Vita's balls off shortly before it launched, it wouldn't have to achieve that.

It wouldn't be the first time we've seen such a thing. A lot of the N64's catalog fits that bill, particularly Mario 64 which granted was a launch title but was never bundled and still ended up selling about 1/3 as many copies as the system itself by the time it was done. Ocarina of Time wasn't far off of that and interestingly is still the biggest selling Zelda title of all time despite being on one of Nintendo's worse selling systems. Nintendo losing general customers from the SNES to the N64 didn't result in a loss of customers for the Zelda franchise.

If the Wii U can revitalize itself later this year I'm interested to see what kind of attach rates Mario Kart, et al can pull.

Oh, Kasz. If you understood what it is you wouldn't ask that question.