Of course, this is US-only, which is by no means representative of what's happening elsewhere.
The smartphone market in the US is dominated by "superphones" being sold cheap along with 2-year contracts, so gaming-capable high-end smartphones are have a much larger install-base in the U.S. than the rest of the world.
Not to mention that 2010 was the last year of the (exclusively sold) 7th-gen portable consoles, with the 3DS long announced for Q1 2011. It's no surprise that software sales for portable consoles went down, as people are now expecting the next-gen.
2011 and 2012 should be a whole other story.
BTW, software sales for the Xperia Play should go where? Consoles or smartphone? The device is both..
Not that I don't think the smartphone games market will continue to rise and eventually match\surpass the portable consoles, but it'll be nowhere near the year-on-year growth we see in that top chart.