I think the prospects for handheld gaming would be a lot better if they'd drop the gimmicks like 3D, social networking and
unnecessary touchscreen controls to bring costs down, before offering a downloadable mix of cheap and 'proper' games alongside retail. You know, put their money where their mouth is in 'downloading being the future', 'piracy' and so on. Ironically, Sony's leading the way somewhat with the Vita, only they're pretty much the last Sony division that hasn't got the pricing memo by the look of it
To my mind there will always be a market for dedicated controls, but you have to get your general pricing structure right (
especially these days), or offer some serious quality software to offset it... The likes of CoD, Bioshock, Uncharted etc
may just prop up the Vita, for instance, but strong initial hardware sales are probably essential now.