News out of Japan in the last couple of weeks places Sony at the edge of a crisis. The once-mighty PlayStation division has reported a significant downturn in sales ahead of relatively bare first-party holiday offerings.

Sony's PlayStation division posted an operating loss of US$45 million in the last quarter, with revenue sliding a substantial 14.5 per cent. It's important to note that the value of the Japanese Yen has soared past even the most positive predictions recently, and this has eaten into the profitability of both software and hardware – but even adjusting for currency movement, at least 10 percent of this decline is due to global consumer disinterest in PlayStation's offerings.

More concerning is that during the same quarter last year, Sony posted a US$52 million profit. Since then, the Vita handheld has entered the market. When seeking answers as to just how Sony can be facing such a dramatic change of fortune so quickly after releasing new hardware, several factors must be taken into consideration.

Much of the predicament is down to a fast-growing mobile gaming market utterly dominated by Android and iOS. Users are flocking to purchase multi-purpose portable devices that offer thousands of low-cost apps and games on demand. Sony has ignored these trends and assumed that the strength of the PlayStation brand would be enough to allow the Vita – a large and expensive dedicated gaming device that has a mere handful of mostly mediocre games available – to flourish. Unfortunately, sales were lukewarm at launch late last year, and have remained so ever since.

In fact, "lukewarm" doesn't even come close to describing the woeful uptake.

By mid-December the Vita's Japanese sales figures were 78 percent down on launch. By February of this year, the PSP – the very device the Vita had been designed to replace – was outselling it.

The Japanese game sales charts are no more encouraging, with Vita struggling to place any title in the top ten, and being routinely thrashed by the DS, 3DS and the older PSP. For the week ended August 5, there are no Vita titles placed in the top 30. This is a week that also saw the Nintendo 3DS, Nintendo Wii, PlayStation 3 and PSP outsell the Vita.

Sony will not release sales data for Vita hardware and software locally. Globally, Sony has tried to obfuscate the sales numbers by reporting the Vita and the PSP together. Even then, it's worth noting that the combined sales of the Vita and the PSP in this quarter are less than the PSP alone in the previous quarter. (The creative accounting doesn't end here, either. PlayStation 3 sales have been bundled together with PlayStation 2 sales in Sony's most recent financial report.)

The overall market for handheld gaming devices – squeezed as it may be by Apple, Google and a variety of handset manufacturers – still appears to be in good shape, at least for Nintendo. The 3DS continues to go from strength to strength, and now moves between 10 to 20 units for every one Vita sold, week on week. Nintendo can rightfully revel in their success, furnished as they are with a strong handful of intellectual property, and a price point far more competitive than Sony's.

The woeful launch of the Vita is therefore not indicative of the future of portable gaming itself, but rather representative of an individual company's mistakes.

The ironically lifeless Vita, a big gamble on 3D that never panned out, and the virtual disappearance of PlayStation Move as a successful product line all augers poorly for the Japanese company. Move has proved to be Sony's "me too" answer to a problem that nobody had – a new method of control to replace an existing controller that worked without any real problems in the first place. It had neither the timely appeal (or price point) of Wii, nor the hands-free point-of-difference found in Kinect. Move is stuck in the middle, and with only accuracy to boast about, it's little wonder Nintendo and Microsoft have utterly trounced it.

This is a time where reduced production costs and well-established gaming franchises should be brimming Sony's coffers in preparation for a new hardware generation. Instead, PlayStation is fumbling. There are some small bright spots on the horizon for Sony: The Last of Us and Beyond: Two Souls both look very good indeed. But strong software cannot balance the ledger alone. The probability of a PS3-4000 "Super Slim" announcement at Gamescom next week ought to be backed by a substantial reduction in recommended retail price to the Vita in order to recapture the public's interest in Sony's handheld offering.

At least if the retail price is kept down, local consumers can absorb freight costs in order to avoid paying the incongruous regional premium that seems to find itself attached to all technology in this part of the world.