Everybody is wild about Apple (AAPL) these days. The new iPhone is in high demand. The iPod and iTunes are by far and away the standard in digital music.

However there is a select group of investors who would likely be just fine if Apple fell off the face of the earth. I’m talking about shareholders of Sony Corp. (SNE).

It used to be that Nintendo (NTODY) and Microsoft (MSFT) were the primary troublemakers for Sony. It seemed like every month, these companies made a move that would further erode Sony’s once-dominant perch on top of the video gaming market. The Wii and the Xbox were cheaper than the pricey PlayStation 3 console. These competitors also boasted exclusive titles like Nintendo’s iconic Mario and Zelda games and Microsoft’s wildly successful Halo series. And most importantly, MSFT and NTODY were making good money on their gaming divisions while Sony was stuck in a downward spiral.

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Last month, Sony finally bit the bullet and slashed the price of its PS3 console by $100 to spur demand. The price cut released some pent-up demand and helped the PS3 become the top-selling game console for the first time in the United States in September. It looked like things were picking up.

That’s where Apple comes in, with its red-hot iPhone sales and wildly popular apps. According to  a new report from DFC Intelligence, a firm that closely tracks the interactive entertainment industry, the iPhone and iPod Touch will be the “primary driver” of mobile game sales growth by 2014. DFC thinks that Sony’s portable PSP unit has reached its maximum market share as a result, and predicts that larger consoles like Sony’s PlayStation will lose out as gamers get more and more mobile.

It’s sure been a bad run for Sony lately. And unfortunately, it’s about to get worse. While in the last two quarters, the company’s profits exceeded Wall Street expectations, the fact is that SNE reported a loss each time. For Q1, the company lost $1.68 a share, and most recently in Q2, Sony lost “only” 39 cents a share. For its last full fiscal year, the company swung to its first annual net loss in over a decade

Not to rub salt on Sony’s wounds, but it doesn’t look like things have improved at all for this company. My estimates indicate another shortfall this time around when the company reports earnings tomorrow, compared to earnings of 19 cents a share for this quarter last year.
 
Video game operations were once a big driver of Sony’s sales, but now appear to be its Achilles heel. And this time, there’s a new competitor to blame.

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