I can understand skepticism regarding some of the numbers being thrown around about the potential size of the mobile gaming market (e.g. $7 billion by 2008), since these numbers are guesses at best, and are far too reminiscent of the types of things people used to say about the market for PDA games several years ago, which of course never really materialized. But...
1) Even if the numbers being thrown around are overly-optimistic, the fact remains that there is significant growth in this area. Hundreds of millions are being made on mobile games now, and with better gaming handsets coming out and new markets opening, that number is increasing rapidly. So even if mobile gaming is unappealing to some people, it's clearly true from the numbers that there are lots of people who enjoy it.
2) The cell phone market is very different from the PDA market. Besides being several orders of magnitude larger, people are upgrading their cellphones every 2 years on average, and because the technology is advancing so rapidly, every time they upgrade, they are getting a device that is better suited for games. Also, the distribution models on phones are much better than they are on PDAs.
Granted, the mobile game industry isn't without its challenges. Variance among handsets means a huge porting effort if you want to make your game widely available, and some handsets simply aren't well-suited to gaming. But standards are emerging (i.e. OpenGL ES) and developers have become very efficient at porting to multiple handsets.
As for handset design... I have sitting on my desk a prototype phone that we (QUALCOMM) made. Here's a photo of it:
This isn't intended as a commercial handset. Rather, we use it as a development platform, as well as something to show to handset manufacturers to give them an idea of what a gaming phone should be (and hopefully, they'll improve on the idea).
As you can see, the thing has a joystick, d-pad, shoulder buttons, and can "transform" into gaming mode. The screen is about the same size as that of a GBA, but higher resolution (320x240), supporting 16-bit color. It also has hardware accelerated 3D (exposed through OpenGL ES) on par with the Playstation. We've been working with developers like EA, Ubisoft/Gameloft, etc., with developing early 3D games for it, and I honestly enjoy playing games on it.
I think it's unfortunate that many small development studios and individual developers have missed out on opportunities offered by mobile gaming. At least until recently, the bar for entry was fairly low, both financially and coming up to speed technically, so this has been an area where someone who wanted to start their own dev studio or even just break into the industry could have done so fairly easily, at least in comparison to other platforms. That's unfortunately changing now, but if you currently have experience as a mobile game developer, you're in a good position. Pretty much every major game publisher is trying to establish a presense in mobile. To do this, many of them are buying up as many mobile development shops as they can. If you have experience in mobile AND 3D, you're golden.
In reality, the window of opportunity for breaking into the industry relatively easily through this route probably isn't closed yet, so if that's something you're looking to do, I'd suggest not being too quick to dismiss mobile gaming.
