I can't really see how smartphones and tablets beat out handhelds. The two gaming experiences are essentially identical except for the mode of control: touch versus button, and from my experience touch is terribly imprecise and unreliable, ruining any gaming experience I've tried.
Besides that, phones and tablets aren't really optimized for gaming, sometimes giving odd or inconsistent performances. Even still, if games development shifted entirely over to the mobile frontier, I think it'd make it more difficult for developers to make games that ran well on all systems and all OSs. Mobile games would need to stay scraping the bottom of the technological barrel to guarantee the widest demographic the way they do now
EXCEPT
if there were a standardized mobile gaming platform with gaming-focused OSs and comparative hardware capacity that developers could focus on, then those problems wouldn't exist. Then at that point, you'd have made a handheld console the same that exist today, only possibly with the inferior touch controls. Otherwise, we're back to where we started, having replicated the handheld market. Seriously, I can't find a single advantage to moving gaming completely, or even partially, over to mobile.
The reason you can't see how smartphone beat out handhelds, is because you compare their capabilities in the delivery of quality gaming. Obviously, a proprietary gaming handheld will almost always deliver a better gaming experience than a smartphone. Not only is a 3DS / Vita optimized
SOLELY for gaming, it also has the much needed physical buttons.
That was never the problem. That's well known. Yet, Vita's and 3DS's
stay in the shelves when compared to Smartphones, and for a very simple reason:
Functionality.
While your 3DS does gaming and gaming
alone, your smartphone
even a crappy one, does gaming, work, browsing, apps, calls, 3G, and so much more.
In today's day and age, only the most avid players will seek out and "waste" money on proprietary gaming devices such as the 3DS and the Vita. The casual gamer, will stick with his Smartphone and play what is available there. So in short, Nintendo does
NOT have the casual market, which is the one that will make big bucks.
Now imagine, if you could buy Pokemon Sun or Super Smash Bros on the Play Store / App Store. How you play it, is up to you. You can use a gamepad or use touch controls.
But if that was the case, now the casual people who
DIDNT bother to buy a Nintendo 3DS, will
still buy the games. We saw this so very clearly with Pokemon Go. Many people who even downloaded Pokemon Go, probably hadn't played Pokemon since Pokemon Gold on the freaking Game Boy Color.
This is the direction to go. Do we like it? No. I'd rather have a 3DS with proper hardware and physical controls. Is that working sales wise?
No. No it isn't.