I don't think it could be said better. 

I largely agree with Entroper as well. An interesting point of contention, however:

Several people have noted that a company entirely devoted to a specific field or arena tends to work exceptiionally hard at excelling in that arena. While I agree that in reality this often ends up being the case, is there any theoretical limitation stopping a single company from making exceptional products in several different fields at once? For example, if Toyota and Nintendo merged, would this automatically reduce the quality of either of their products? I think one could make an argument that both are exceptional in their separate fields right now. How or why would this change in a merger/buyout?

I suppose I'm marking a distinction between a practical problem (it's difficult to maintain exceptional output from varied products when you are a conglomerate) and a technical, unavoidable problem -- such as cash flow. Which is to say, I believe I could make the argument that the Sony/Microsoft model is superior. There is no question that having more money to devote to specific projects at specific times is an advantage; there is no avoiding that problem, and Nintendo doesn't have non-video game resources to fall back on if and when it is needed. Conversely, Microsoft and Sony could theoretically excel in exactly the same way Nintendo does, without outside funding. I know that in reality that isn't the case, and that both the Playstation and Xbox brands have relied heavily on financial support from other sectors of their company. But isn't it... possible, at least, that they shouldn't have to do that?

Does that make sense?

I thought of a simple way to explain what I mean in that giant post above this one.

There is no technical issue that stops either Microsoft or Sony from operating using Nintendo's marketing model. However, there is a very real limitation stopping Nintendo from using the MS/Sony model -- that is, they aren't a conglomerate that can draw on funds from outside the video game market. Therefore, the MS/Sony model is inherently superior. 

Well you have to remember why Microsoft entered the game world in the first place. For the last 10 years, they were frowned on Walstreet for no longer being a stock growth. They just were not growing mostly cause they tapped their market to saturation. They needed to enter new markets to grow. They dont need more profits, as a company, there probably happy, but they need new investors and they wont iattract any if investors feel they wont get any returns. The gaming world is rich and so is the Mp3 portable media player world. gaming made Nintendo the huge empire it is today and Ipods made Apple the huge empire they are today. They entered these highly competitive markets, if for any other reason, greater revenue and growth. There real enemy, do not be fooled, is Google as their stock growth have been making Microsoft look extremely bad in silicon valley.

I have it like this:

The Wii is the new DS - new controls, not that great hardware

The Xbox 360 is the new PS2 - OK hardware, great games library

The PS3 is the new Xbox - great hardware, multimedia stuff, not so great games library (at least for now) 

Of course it's a bit simplified, but I think it's quite true.

That is an awesome theory, and one that I've never heard before.  MS' stocks were getting flat and potential investors needed incentive.  However, I tend to believe that the reason they entered the game market in particular (aside from the fact that it wouldn't take much effort for them to build a console) was to directly combat Sony.  Sony was taking over the living room entertainment centre, and MS wanted it for themselves.  So, they slapped together some computer parts, made a console that was much more powerful than PS2, made it look sleek and sexy, and shipped it to gaming outlets everywhere.  Even though they failed miserably in the marketshare area, they took a sizable chunk out of Sony's 'mindshare', if you follow me.

  Simply put, if Sony was not already in the business, MS likely would never have jumped in.

 This theory assumes that the availability of funds from the outside is a purely positive impact.

I would submit that the fact that your company is reliant on a single field of products to keep the bottom line healthy is a substantial motivator for putting the most into your product.  People who feel like they are "just another cog" often produce work that is substandard to what they would produce if they were to feel their contribution is beyond meaningful and actually completely essential. 

With that said their are ways to motivate that can be incorporated into the conglomerate model but you can only go so far with that and ultimately it proves to be another source of expense which directly counteracts (partially) the supposed benefit of beinga conglomerate.  

It truly depends on what your goal is.  If it is purely profit based and we are only comparing the division of the conglomorate to the specialized company I would take the specialized company in almost every case.  

As you said (and so did I), in reality, having multiple fields of production seems to muffle the emphasis and/or quality on any singular field. However, this isn't necessarily and absolutely the case, it's just... an empirical observation of what tends to happen.

By contrast, Nintendo's situation is unavoiadable and inescapable. They don't have money from outside resources -- in either the real or ideal world, that doesn't change, and that option is simply not open to them. 

In short, Microsoft and Sony could change to the Nintendo model if they were resolutely determined to do so. However, Nintendo could not switch to the Sony/Microsoft model.

Only Nintendo could disrupt the market like it has, Sony and MS, because of their structure lack the ability to do so, they only understand how to add more power and copy the ideas of others, all their ideas have been to try and make the console more PC like.

Trying to switch to the Nintendo model isn't possible for them Bod, their management and company structure doesn't allow it, notice they operate on trying to educate the consumer on why their products should be bought, rather than what will make more people want to buy their product, like Sony trying to push blu-ray, most consumers don't know about HD picture, ad theink they are watching HD even when they are not, yet Sony tries to educate them on why they should buy Blu-ray, if Blu-ray was something the market really wanted they wouldn't need to do so, DVD wasn't needed to be educated, people knew it was something they wanted, they could tell the difference just by looking over VHS

@tyagi

im looking at your predictions, your first two are abit optimistic dont you think? especially the second one! actually, both are as crazy as each other!