Leynos nailed it.
Also, Sony never understood the portable market quite as well as Nintendo did. They approached the PSP in the same way they approached their home consoles; make it powerful, load it up with multimedia features, rely on third parties to sell it.
Nintendo understood that a low price point and accessible pick-up-and-play software are more important to a handheld than power or being able to watch movies.
It's not that PSP was a bad system, it was just less appealing as a handheld to the casual consumer.