Some big game shops do, IIRC. That was a while back too, when there was 1.6 devices still being used. In my experience, 4 phone devices is about right for Android (and 2-3 iPhones for full testing).
For game shops, the reason they might have more is for GPU compatibility - where actual OpenGLES features can very between devices and you do have to worry about different code paths.
What do you do when someone reports a bug on a device you don't have, and you can't reproduce it on one of the devices you do have? Genuinely curious (I'm a software developer but not on Android).
Usually its not device specific issues but Manufacturer specific issues. Same issues you encounter on Galaxy S4, you would notice on Galaxy S3, Note etc. Having a handset from each of major manufacturer is good enough for 99% of devs.