This is the worst part of all this, imo. People only care about convenience and price, not getting a quality game.
Don't get me wrong, some Ios games are great, (Plants vs. Zombies is an amazing game that gets consistent support from its developers) but most are either too short and get little to no updated content or are only trying to cater to the lowest denominator.
Who cares if most iOS games are terrible? Just don't buy them, there are plenty of sites out there that will help you find the good ones. And even if you mess up, 99 cents isn't a huge loss. For the cost of a DS/3DS/PSP game, you can easily get just as much fun out of a dozen iPhone games.
I mean, obviously, many genres are outright unplayable on an iPhone, and as far as I know, high quality DS/3DS/PSP games are still better than high quality iOS games, but on the other hand, when I'm on the subway or waiting in line, why would I play an epic game? I mean, to me, and to most people, I imagine, mobile gaming is a time killer, it's not a time investment. If for 99 cents I can get something fun on my phone, it works well enough. If I want an expansive experience, I can get that on my PC or on a console, at home.
I think that's the main problem with the handheld console market right now: the plus value of a DS/3DS/PSP to an iOS/Android/WP7 device is actually marginal, and the latter is something most people already carry on them all the time. People's attention span on the go is also significantly lower, so the need for quality gaming experiences isn't as great as it is on a console for example.
Nintendo's mistake here is that they missed the convergence train. It was clear for the past few years that mobile convergence was happening and that the market for dedicated portable music or gaming devices was collapsing. Nintendo should have seen this coming and should have made a smartphone instead of the 3DS.
More precisely, had I been in charge, I would have re-iterated Nintendo's "third pillar" strategy that they used for the DS. I would have made a pure multitouch Android-based smartphone with an *optional* (but cheap) buttons+analog stick add-on, and I would have entered in *direct* competition with Apple: I would have a single Nintendo smartphone model with an integrated experience, a large GB/GBA/NES/SNES/N64 virtual console library with games 99-cent apiece, and cheap new Nintendo games. On that device, I would use both the standard smartphone lingo (AMAZING FACEBOOK INTEGRATION!!!!) and lure in people with Nintendo nostalgia. At the same time, I would tell people, relax, this is not the new DS, this is just a new foray. But if that foray succeeds, I would just drop the DS line, just like the Game Boy line was dropped following the DS's runaway success. Basically, had I been Nintendo, with all my experience with handhelds and gaming, I would have proactively entered Apple's market instead of letting Apple enter mine. I'm pretty sure that would have worked out well for them.