I don't believe smartphone games and FarmVille are a threat to console gaming. Different and sometimes overlapping markets. Different because those who view consoles as "nerdy" readily play games like FarmVille. Overlapping because those who console game may smartphone game and Facebook game while at work.
I voted "split the industry in two." I honestly believe the only part of the industry smartphone and social network games threaten is handheld gaming. If Nintendo does not dive in to the cheap smartphone gaming, they could over time force Nintendo out of handheld gaming altogether because of their sheer scope of library, radically cheap development costs, and Nintendo's own extravagant development costs (in both time and money).
As for Sony in handheld gaming, I am of the thought Sony is not, has not, and will never put out a handheld like the Gameboy, Gameboy Advance, DS or 3DS.
Sony, I believe, is in handheld gaming for the sole reason to hurt Nintendo's bottom line. Sony has shown with the PS1 and PS2 that they can dominate the console market. Henceforth, if they can stick around long enough to siphon off some of Nintendo's handheld core along with smartphone gaming doing the same, they can be enough of a nuisance to force Nintendo out of the handheld market.
