Does the growing iphone industry really matter that much? I don't think it overlaps much. People who buy Nintendo games aren't going to stop buying them en masse because of Angry Birds. The 3DS is failing because of the price, poor gimmick, and lackluster library, not $1 PopCap games.
its lackluster library is because all the garbage theyve released is pretty much primitive stuff that the iphones already have versions of. I agree its not an absurdly large overlap, but there is an overlap and the growing iphone industry will change gaming in many ways. Some for the better, others for worse.