Sony's highly anticipated portable console, the PS Vita, launched last week in Japan with underwhelming sales. During the first two days, the PS Vita sold 320K units, 50K less than Nintendo's 3DS sold during its first two days on the market in February of 2011. No doubt, Sony is disappointed by these numbers, as the company pulled out all the stops to make their product as appealing as possible.

In addition to the impressive 5-inch display screen, the PS Vita was launched with a large roster of popular games. Sony's latest portable console was released along with Everybody's Golf, Katamari, Dynasy Warriors, Uncharted, Marvel Vs. Capcom, Disgaea, and Ridge Racer.

Sony is not the only company struggling in the gaming industry. Despite outselling its main competition, Nintendo is also seeing some major drops in sales. After selling 370K units during the first two days in Japan, sales of the 3DS sharply dropped. Nintendo was forced to implement major price cuts on its products in order to draw in consumers. Fortunately, Nintendo has the popular Mario Kart and Monster Hunter franchises to keep sales afloat, but there's no telling how long that tactic will be effective. In fact, Monster Hunter was launched for the 3DS around the same time the PS Vita was released, contributing to the lackluster performance of Sony's portable console.

Both of the major players in portable gaming consoles are feeling the pressure as fewer people are willing to fork over their earnings on $200 consoles and $40 games. At the end of 2011, nearly a year after the 3DS's launch and only a few weeks after the PS Vita hit the market, the two consoles are neck in neck, at the 7th and 8th spot on Amazon Japan's video game category. Neither of these positions are ideal for the companies, especially around the holiday season. It seems that some Angry Birds have elbowed their way into Sony and Nintendo's customer base.

For the first time, smart phone and tablet PC games are competing with portable gaming consoles. Unfortunately for Sony and Nintendo, competing is putting it lightly. Not only do the processing power and display quality of smart phones and tablets blow the 3DS and PS Vita out of the water, the games and hardware are also available at a much lower price. Most of the popular smart phone games sell for a mere $0.99, compared to the expensive $40 console games.

Sony and Nintendo have a slight edge in that their games have an established fan base and are exclusively available on their consoles. The $40 games are also more complex and generate much larger revenue than the $0.99 alternatives. However, the fact that the games are so inexpensive, and that they are available across multiple platforms, means a much wider customer base. Angry Birds, for example, can be downloaded on the iPhone, Android phones, tablet PCs and the Chrome browser on a notebook or desktop PC. Due to this widespread availability and affordable price, the game has been downloaded an incredible 600 million times.