Oh please. Katamari is a niche success, sure. But the suggestion that something as small as Katamari is just as important to the Playstation's success as, say, Grand Theft Auto, or Gran Turismo, or God of War, or Madden, or more recently Call of Duty, is silly.
This isn't some crazy idea I came up with. Sony has on several occassions explicitly stated that their strength is in big, blockbuster production games.
The market does. The way the Vita was marketed -- specifically advertising how much more powerful it is than the 3DS, for example, focusing on "PS3 in your pocket" advertising -- prevents these games from being successful.
Nobody is buying the Vita. The market the Vita was supposed to attract never materialized. So yes, it's possible the Vita could reinvent itself given the complete collapse of its primary market, but in the short term this is why the Vita is failing.