You're discounting two phenomena that helped them weather the tougher times and are unlikely to repeat - Pokemon (you can't really count on another such a massive media franchise popping up) and handheld gaming dominance (iPhone and Android killed this market for standalone devices).
Have they really killed it? There's obviously more casual gamers carrying mobile devices around, but but they weren't buying handhelds to begin with. Everyone I know that previously used a DS or PSP for gaming still prefer that type of device over a touch screen phone for any sort of involved gaming session. If you have a link to research showing that core market has moved on, I'd love to see it.
