I don't understand the Iphone videogame market.  It doesn't seem like a good financial deal for publishers to put their star games on that platform.  Yet, we keep seeing big games such as EA Active, Streetfighter 4, and Grand Theft Auto Chinatown Wars being placed on this system.  Streetfighter 4 is being priced at only $10 on the Ipod Touch.  How the heck are they going to make any money, especially after Apple gets their cut?

I know portable developers are flocking to the Iphone, but it seems like fool's gold for all big publishers.  If these games can sell several hundred thousands of copies for the DS or PSP for $30, why are developers so intent on putting them on the Iphone in the $3-$10 range?  Grand theft Auto Chinatown Wars was a million seller for the DS, but they still want to move it to Iphone.  Somone please enlighten me.

Low cost+High Revenue=Big profits

Easy money

But how many coopies of these games is the Ipod actually selling?  I haven't ever seen charts for Ipod.  Games on Ipod are going to have to sell way more copies to recoup a profit because they sell at such a low price point.  And how can games for Iphone be any more low cost than DS games?  Many of them are direct ports. 

I'm still having trouble seeing how games selling for $3-10 are profitable than games selling than games selling for $30.  The DS sells in high volume, does the Ipod exceed that volume or something?

Every one has one of those, the user base is huge.

Though i only get free stuff for my Touch. If something really good comes along i might get it.

Porting costs a fraction on initial dev costs. They don't have to sale anywhere near as much to make profits.

Of course a port is cheaper, but if they made a good exclusive game that was not a port it seems like it would be much harder to recoup a profit than on the DS or PSP.  I guess I just need to see some charts of Ipod sales/profitability. 

Here are a few points for you:

1. The iPhone/iPod Touch has a user base of ~70 million units, if not more. Its selling faster than the DS is, currently. The iPhone shipped 8.7 million units in Q4 of 2009. The DS sold 11.9 million. That doesn't include iPod Touches which sold well over the gap of 3.2 million.
2. Games are selling fairly well on the iPhone. The Sims 3 has sold about 1 million copies so far between $6.99 and $9.99. Grand Theft Auto sold about 250,000 copies within 2 weeks of being on the iPhone @ $9.99, and Plants vs. Zombies sold 300,000 units in just 4 days. 
3. Publisher profit margins are much better on the iPhone. On the DS, you have to pay for expensive carts, Nintendo royalty fees, retailer margins, and more. On the iPhone, its simply Apples 30% cut and your 70%. In all actuality, if you sell a DS game at $20 and an iPhone game at $9.99, your making slightly less on the iPhone game.
4. Development costs are cheaper. Since its Mac based, you simply need an Apple computer to start working on iPhone games. As you said, many of the titles are direct ports, which cost almost nothing to make. Not a bad value proposition.

Take 2 gets 70% of the revenue of that iPhone/iPod sale, compared to 40-50% of a DS retail sale. They will never overproduce or overship units on the App Store, so they won't have to worry about returned or discounted merchandise killing the profits on that revenue. GTA:CW will never be out of stock or out of print at the App Store for the foreseeable future, so Take 2 may continue to see revenue from the iPhone version long after the last unit for DS ships to retail.

Actual costs and revenue numbers from the App Store are scarce, but I don't think there would be quite so much developer enthusiasm for the platform if there weren't people making good money on it.

Cause idiots like me keep buying these games.. 6.99 - 9.99 is a great price to buy stuff impulsive.... and some games are more then worth it..

Okay, in that case I'll cite up-and-coming mobile publishers like NgMoco and Gameloft who have been showing very strong growth and credit the App Store as a key factor in their success. Perhaps the mega-publishers have just been throwing money down the toilet, but these smaller guys have financials that say the iPhone has been good to them.