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Soundwave said:

I don't think the problem with a "new" iPhone or iPad is so much that the parents go out any buy the newest model for their kids asap. It's more like they might buy the new iPhone or iPad for themselves and guess who gets their old iPad/iPhone? The kids. Who then proceed to download games for it the first chance they get.

So why pay $170-$200 for a 3DS plus $30-$40 per game when as a parent you can just get yourself that new iPhone and give your kid your older iPhone 5 or something?

Even Miyamoto has said he is worried about hand me down tablets/phones taking over their market. 

This is exactly the issue. Nintendo has to complete against hand-me-down tablets and smartphones. As you said, why pay $200 for a DS and $30 per game for your child when I can just give them my old smartphone when I upgrade every two years.