Apple’s iPhone and iPod touch have been touted by analysts and developers as the next big portable gaming device, but the all-touch devices may be more talk than walk.

As Nintendo and Sony ramp up their efforts on the digital distribution front in addition to their dominance in retail, hot-shot Apple CEO Steve Jobs will soon realize he has nowhere to turn for gaming.

“Certainly the gaming experience on the iPhone is superior to what you get from an average mobile device,” said Carolina Milanesi, research director of mobile devices at Gartner. “However, I think that people who are buying a DS or PSP will continue to do so.”

Ms. Milanesi goes on to compare games on the iPhone to cameras on cell phones. While camera phones have affected the low-end digital camera market, people who have a vested interest in photography will buy a separate camera.

The key here is “low end.” At Apple’s Let’s Rock event September, Mr. Jobs said that “now you can make a pretty good argument that it [the iPhone] is the best portable device for playing games on.” That’s quite the bold – and presumptuous – claim. Perhaps, though, Mr.Jobs meant the best cell phone for playing games on, because comparing the iPhone to the DS and PSP for game play is a joke.

Over 41 million PSPs have already been sold worldwide, and even that pales in comparison to the incredible 84 million DS handhelds that have been sold worldwide. Nintendo and Sony’s control over the handheld market leaves little to no room for Apple to enter the fray.

Even Apple’s main selling point when it comes to games – the App Store – is starting to be overshadowed. 

“A strong point to stress is that you are starting to see traditional handheld systems moving towards digital distribution,” says Gonzague de Vallois, senior vice president of publishing for video game developer Gameloft.

He points to the DSi Shop and the PSP Store as examples. TheDSi Shop, which launched in Japan earlier this month, is the most direct competition to the App Store, with applications and games available for free or for cheap.

Ultimately, it comes down to quality and price. The games on the App Store are certainly cheaper than most of Nintendo and Sony’s offerings, but it is also clogged with sub-par games. With Nintendo and Sony’s entry and expansion within the digital realm, along with their current dominance of retail, Apple's Mr. Jobs will be backed into a corner with his games strategy, where he will only have a gaggle of low-end puzzle games to play on his iPhone.