I think NA/PAL sales and Vita sales in general are very much reflexing that.   3DS is doing fine in Japan though (possibly at Vita's expense thanks to MH)

Actually, they arent, maybe for vita, but the 3ds is tracking ahead of the DS

Only because DS had such a slow start due to a lot of confusion with the product early on in its lifecycle (coming right in the middle of the GBA's life). 

The 3DS should be selling comparably to what the DS was doing 3-4 years ago. It has Mario (2D, 3D, heck Mario Kart too). It now has a revision. It has other games like Kid Icarus and Resident Evil Revelations. It's had an $80 price cut. It's available in like 5 different colors. 

There should be no reason why it's selling so much lower than the DS was a couple of years ago in the West. 

In Japan the 3DS is doing well, but that's one market where handhelds really have replaced home consoles entirely. People use their handheld there as their main gaming device. This isn't the reality in the West and likely will never be. 

Even there though honestly people have forgotten the monster numbers the DS was putting up in Japan at this time at the height of the Brain Training craze. For example during Obon week this year (its second Obon) just last week the 3DS sold 107,000 or thereabouts. Not bad. But the DS in its second Obon almost hit 250k. 

NSMB2 is just now hitting 950k in Japan in its third or fourth week. NSMB on DS sold 850k in its first week on the market alone. Obviously 3DS is doing well in Japan, but definitely not quite at the insane level the DS was.

You'd figure the ESRB would adjust for things like that.

Why would they? They can't force phone developers to play by their rules, and they have no special interest in the fortunes of game studios. The only thing I can imagine changing would be if Congress or something else of equal importance got upset at the phone games market and forced them to adopt the ESRB. THAT would be a very interesting future, where cell phone games have a floor equal to handheld and console games.

Then our goal is clear: develop a phone game that puts out subliminal gay and racist messages.

^Now that was some nasty joke. lol

Who cares about Vita? These comments are only about the 3DS and it is doing quite well in the U.S. Vita's failure is its own issue just like the PSP before it.

The failure of Sony's platforms speaks nothing about the performance of Nintendo's handheld and Satoru's Iwata's comments.

Even Iwata has acknowledged 3DS relative sales weakness outside of Japan, but they keep hoping the lastest game will give it the boost it needs (currently NSMB2).

PSP sold 70m+ units, which, if I'm not mistaken is more than NES, SNES, N64 or GC sold although not as much as Nintendo's handhelds.  Hardly a failure.

Vita's struggles and 3DS's softness in sales outside Japan do suggest the market is changing.   Vita, moreso than 3DS offers deeper, richer game experiences, yet it's struggling terribly.  The other problem with his comments is the assumption that that iOS/Android would never get deeper, richer experiences.  I think that's only a matter of time.    They may not get as deep as what home consoles offer, but then they don't need to, as seen by Vita's struggles, there's not a big market for that.

You are quoting stats out of context and inconsitently.