What went wrong with the Vita may very well simply be that there isn't demand for a dedicated handheld outside of the market Nintendo shoots for.
Wasn't the paradox of the PSP that it actually sold good numbers by the end, yet had poor software sales? I assume it was due to the piracy issue: PSP was easy as dirt to turn into an ISO machine, practically the Dreamcast Pt. II. So sure, hardware sold great, games not so much.
If that really is the case, it sure makes it look like the primary legitimate (non-piracy) interest gaming handhelds still centers around Nintendo, because they hit the all-range mode audience. Kids, teens, adults, 'casuals', everybody. And they've got Pokemon.
Problem with the Vita is taking a critical look at it, there just doesn't seem to be a lot wrong with any aspect of it, by itself. The underhanded trick with selling expensive proprietary storage is the biggest offense, and maybe a statistically significant contributing factor to its poor reception. But otherwise: it has great tech and features for the price. A free online multiplayer service. Great battery life for its output. It's just barely small enough to feel legitimately portable. Skirts the edge there. It launched with an incredibly strong line-up of games compared to most console launches, nevermind portables. Its digital backwards compatibility with PSP is executed extremely well and a major bonus for non-piratey PSP owners - all five of them
And apparently nobody is interested. Maybe the price is too high; if it is, I don't think it's by much. $200 sounds better, nothing crazy like $150.
But at the end of the day, what if there simply is not a great market, at the very conceptual level itself, for dedicated gaming handhelds that aren't kid-friendly Pokemon devices?