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S.T.A.G.E. said:

Nintendo will not make a Karaoke game. Sony and Microsoft will acquire all licenses before they get the chance. Nintendo wont be able to compete powerwise.

I don't totally agree with your logic (I'm sure most recording companies will be happy to sell the song multiple times over to Rock Band/Lips/Guitar Hero/American Idol/Singstar/Everyone else) but you've definitely got the right idea: Karaoke is Red Ocean. Sony and Microsoft already have their own products and with the way music games sell on Wii you can bet there will be many third parties pumping out Karaoke games for Wii by the end of 2009.

Some people suggest Nintendo should go ahead if it can come up with smart ways to "Nintendoize" the genre...I will agree with that, but in general I think the genre is well-established and Nintendo would be better off seeking new ways to bring in new customers or to get recent customers to move upstream to more complex games.