While there are no shortage of handheld game systems on the market–the Nintendo DS and DSi are still selling well and the PSP continues to hang in there, while the App Store continues to expand its catalog every minute–one of the seemingly no-brainer bets in the mobile gaming realm hasn’t happened yet: the Zune. We say “no-brainer” for several reasons:

* Microsoft has a successful gaming platform in the Xbox 360, emphasizing online and downloadable gaming.
* Microsoft, compared to Sony and Nintendo, is best able to take on Apple in terms of a media-management software store and the ability to build an equivalent music/games/movies catalog, and making that product PC compatible.
* The Zune HD now plays games.

The first point is obvious. The second is debatable, but we say this because Sony, while having a decent media library on PSN, just isn’t historically great at building cross-platform software for syncing the PSP, and Microsoft’s global software reach is simply stronger. The third is technically true–Microsoft launched a small collection of completely free-to-play, ad-supported games for their OLED-screened Zune HD Zune HD last month, and one of them happens to be an adaptation of Project Gotham Racing.

It’s an interesting prospect (and one we’ve wondered about before) because the Zune HD processor, an Nvidia Tegra, has both HD processing muscle and 3D graphics capability. We downloaded and played with all the Zune HD games currently available–all twelve of them–with some curiosity to see if the Zune could compete as a game device.

Overall, the Zune HD games are similar in quality to iPod Touch and iPhone titles. The Zune HD has an accelerometer and multitouch, just like the iPod Touch, but its screen is smaller, making controls even harder without feeling ham-handed. Now, in fairness, all of the Zune’s games are free, and thus many are of demo quality. PGR, with its Ferrari branding, is a pared-down game, a “lite” version. Still, the track graphics and controls are impressive, and definitely Touch quality. Other games, like Audiosurf Tilt (which generates tracks to music) and a Texas Hold ‘Em, are better than most freebies but are titles we probably wouldn’t pay more than a few bucks for.

The Zune HD below a PSP Go: adding a control pad would make sense.
(Credit: Scott Stein/CNET)

The most obvious idea would be to expand the Zune HD in size slightly, add a physical controller (perhaps similar to the sliding PSP Go), and then open up a Zune game marketplace that syncs with Xbox Live. A big move towards this being a possibility was the recent Xbox 360 update that opened up a Zune marketplace on the 360 dashboard. While it currently doesn’t offer games, Microsoft already allows Zunes and Xbox Live accounts to share digital funds for transactions, opening up a smooth doorway to a mobile game console ecosystem. The current Zune HD is so small–smaller than a PSP Go or an iPod Touch to a significant degree–that Microsoft could even sell a clip-on gamepad (with a speaker, preferably) and still have a portable device that wasn’t bulky. And its price is competitive with the PSP, iPod Touch and Nintendo DS, at $219 for a 16GB model. Would you want a Microsoft Zune/Xbox handheld? I’d say the answer would be yes, and we’d agree, provided it actually used physical controls. And if they were able to corral the Xbox Live Arcade development community (and even the XNA indie crowd) to make games, it could catch on much faster than anyone might expect.

Right now, the Zune HD isn’t a game platform. But, even in its current form, it could be with a simple strategy shift. The question is, is there room for another mobile gaming platform?

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