Handheld gaming consoles are for kids, Apple can take that too
Nintendo has proven that handheld consoles with games like Mario, while briefly popular among the adult audience are mainly attractive to kids. Nintendo manages to sell tons and tons of consoles to kids all around the world. They keep the price of the console reasonable, but the games cost a fortune and they are fantastic at making marketing tools like cartoons (i.e. pokemon) and other things to attract kids all around the world to the games.
What's interesting is the iPhones when you're done with them AREN'T thrown away. The majority of the people who had iPhone 1,2,3 and 3Gs that have upgraded have handed down their phones to their spouses or their kids. Many people even justified the upgrade to the iPhone 4 by saying "well my kid needs a phone". And with tools like "Find my iPhone" it is very popular for parents to make sure that an iPhone is in their kids backpack which makes it so they can be easily found if necessary. I have even used "Find my iPhone" to track down my son who went to a friend's house after school and I couldn't remember where the house was, so I just popped up the tracker on my iPhone and drove straight too him.
There is however a good point made in the article regarding "When you can play high end games with a full game pad...". Well, this is where making accessories for "last year's phone" really makes sense. And Apple even has reason to make this popular.
Step 1 : Apple makes a standard API for game controller cases so that games can detect and use game pad cases or external joysticks. When this happens, the on screen game pad disappears and the controller takes over.
Step 2: Sega and other companies which already make console games for the iPhone put more effort into the nintendo age group. More Sonic and stuff.
Step 3: Apple attacks Nintendo head on in the press. Point out that there's no need for a silly thing like a handheld 3D console when you already have your old iPhone laying around waiting for your kid to use it. Focus on things like "Who needs Mario when you have Sonic and Sonic only costs $2".
Step 4: Sell a shit load more iPhones, iPads and iPod Touches by explaining that it's MUCH cheaper than Nintendo and PSP. Simply put, it is. Since my kids started using their iPhones, I have only had to pay for one massively overpriced Nintendo game (a new pokemon episode).
Step 5: Have a huge internal game development group at Apple which develops their own new franchises while also assisting companies like Lucas to port things like the Lego games. Buy the rights to awesome games which went the way of the do-do due to bad marketing like "Croc, Croc 2, Titan Quest etc..."
Remember the gaming business is worth billions. Apple, if they built 'Apple Games' similar to "Microsoft Games" would have a new billion dollar enterprise within a year. Publish the games for i(Phone|P[ao]d]) as well as for the Mac. Hell, might as well do the Windows versions as well since the Windows port would be little more than just make files and an installer.
Step 6: AppleTV 3
Make the games work with that too using BlueTooth controllers. Hell, most would probably work with Apple TV 2
Step 7: Watch Nintendo, Microsoft Gaming and Sony finally give up and start making games for Apple devices instead.