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The big question here is how exactly do the two industries interact? The article mentions the rise of mobile gaming in Japan, but at the same time portable systems are seeing incredible success.

In many ways, the mobile market is similar to the Wii. The iPhone and Android OS have opened up gaming to a much broader audience than before. Of course, the potential smartphone market is much larger than the Wii market, seeing as the penetration for smartphones is incredibly high.

As much as I hate to do it, I'll use personal experience. Pretty much everybody I know has downloaded at least one mobile game, whether its angry birds, papijump, infinity blade, or whatever. However, among my friends who regularly played the GBA/DS/etc, I haven't noticed much of a decline. Most people who buy dedicated handhelds are dedicated gamers, and the Smartphone market still has a tremendously long way to go before they're really winning over these kinds of gamers in large numbers.

Where Nintendo is at risk is among the Brain Age/Nintendogs market that helped make the DS so successful. Nintendo will have a tougher time convincing that crowd in the value of those games. Nintendo hasn't really made their big casual push with the 3DS yet, but it's going to be interesting to see how games like Animal Crossing and Demon Training perform next year. Hopefully, Nintendo will be able to properly explain the value proposition of this software.

While many people see the iphone as doom and gloom for the handheld market, I think it's actually a tremendous opportunity. Again, look at the Wii as an example. The Wii enjoyed an incredible level of success, and many people who had never even considered owning a gaming console purchased it. Towards the end of the Wii's lifecycle, Microsoft and Sony have been trying to draw some of those Wii fans to their system. In this scenario, the Wii was essentially a gateway console which allowed Sony and Microsoft to tap into a more casual market.

In the same way, ios and aos games can be a gateway to dedicated portable consoles. Many (the majority even) of iphone/pad/pod/w/e games are going to be perfectly content with the offerings on the ios. They'll play free aps, and perhaps download the occasional paid game, and they'll be fine with that. Others will start to desire deeper experiences and will work their way up to more complex ios experiences. As gaming becomes part of their regular gaming lifestyle, having a dedicated handheld may start making sense...

Of course, not all ios gamers will wind up with a 3DS or a Vita, but some will. If 1 out of every 10 ios owners who were not previously gamers eventually wind up purchasing a dedicated handheld this would largely expand the traditional handheld market.