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.







