Nokia spent a fortune trying to make the N-Gage happen and the lasting cultural contribution was a photograph of somebody holding a taco to their head, which is roughly the level of seriousness the phone gaming business currently deserves.
It is worth remembering how badly that went, because the failure was instructive rather than just funny. The original required you to remove the battery to change a game cartridge. The speaker and microphone sat on the edge, so you held it sideways to make a call. Nokia had correctly identified that people carry a phone everywhere and a Game Boy sometimes, and then built a device that was bad at both jobs. The QD fixed the worst of the hardware and by then nobody was listening.
What replaced that ambition is a much smaller and much worse business, and it works like this. A studio builds a game in Java, which sounds like write-once-run-anywhere and in practice means porting to several hundred handset variants with different screen sizes, different key layouts, different memory ceilings and different broken virtual machines. That game then has to get onto a carrier deck, because the deck is the only shop that exists. The carrier takes a large share of a five dollar sale and decides which twelve titles a customer ever sees.
The results are exactly what you would expect from those incentives. Every deck carries the same brand-licensed tie-ins, the same puzzle clones, the same football game. Nobody experiments, because a studio that cannot reach customers without permission builds what the gatekeeper wants. Qualcomm’s BREW is a tidier technical proposition than Java and does nothing about the distribution problem, since it hands the same gate to the same operators.
Meanwhile the actual handheld market is having one of the more interesting years in its history. The DS is selling in volumes that make the phone gaming numbers look like a rounding error, and it is doing it with a stylus, two screens and games that could not exist anywhere else. The PSP is the better piece of hardware by any measure you like and is losing anyway. If you want evidence that portable gaming is thriving, it is right there. It is simply not happening on phones.
The thing I keep turning over is why not, because the raw capability argument stopped holding a while ago. A current midrange handset has a screen and a processor that would have been a credible portable console three years ago. The hardware is not what is missing.
What is missing is that nobody can reach the customer. There is no shop. There is no way for somebody who has made something good to put it in front of the people who would like it, without first convincing a telecommunications company that it fits their content strategy. Every other part of this business is solvable engineering. That part is a structural problem, and no handset maker has an incentive to fix it, because the carrier subsidises the handset.
Whoever does fix it takes the whole category. It will not be Nokia, who tried to win by building special hardware when the problem was never hardware. It will not be the carriers, who are extracting rent quite happily. My guess is that it comes from outside the industry entirely, from somebody who already knows how to sell small pieces of software to large numbers of people and has no legacy relationship to protect. I have no idea who that is. I am fairly confident it is not anybody currently exhibiting at a mobile trade show.