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Price.

While $250 might be justified when you consider its guts as compared to other portable hardware... it really is a bit high for a portable game console where its mass consumer is primarily younger and forced to buy at the generosity of parents.

I think its selling just fine given its game selection and price. Come holidays when it has a much larger library and many bundled deals (as it won't get a price reduction yet), you'll see a significant rise in sales.

Then the following year after a price cut, it will begin to explode just as the DS did.