Why the fixation on price? Being cheaper than the incumbent is part of what disruption is all about. Plenty of dead incumbents spent their last hours counting up fat revenues.

While 50 million people are playing Angry Birds, they can't be playing New Super Mario Bros. at the same time. Get it? Smartphones don't need to sell a single $25 game to completely eclipse handheld console gaming.

I have a full understanding of why the PC gaming market never could beat the consoles despite the graphics improving vastly in a 2 to 3 year period. From 2002 until 2008, I was an exclusive PC gamer who upgraded the various hardware components of my Dell desktop every year or two to keep up with the games.

PC never edged out consoles and never will because of how complicated they are to upgrade to keep up with the current generation of games. Consoles, hand-helds, and smart phones once you buy them, you never have to worry about opening up their case to install more RAM, a new processor, or a new graphics card. With PC gaming you do, unless you have $1000 to $3000 to blow every 2 to 3 years on the latest, greatest gaming PC, then you have to crack open that casing and learn how all the components of your PC work like many others and I have.

This buy it and never have to physically upgrade it yourself construction of the hardware of consoles, hand-helds, and smart phones is what makes them so user friendly and the preferred platforms to play video games.

The issue of "software" has been debated quite well and there is nothing meaningful I can contribute to this discusssion at this point as the ones I would have raised have been raised already.

As for Nintendo, I believe their game development model which leads to $20 shovelware and $40-50 most wanted hand-held games is their biggest hindrance in the future. When the competition is able to put out a Street Fighter 4 for the iPhone with an incredibly close rendition of the graphics (characters not backgrounds) compared to the consoles for $5 to $15, then you are already at a technical and pricing disadvantage.

The important point is Nintendo needs to be speed up the game development process to cut down on software development costs, which are factored into the retail price of the game. Meaning. allow only 1 to 2 games per year where the graphics are created from pencil and paper from the likes of SquareEnix, the rest of the graphics in hand-held games built from computer graphics software, devote less money to musical scores, and push your smaller, less known developers to create out of this world games like Tetris and Brain Age.

I'll admit price isn't everything. However, I still see games on smarthphones as filler. I play games on my blackberry when waiting for something. Games sell (in my opinion) for two big reasons. Fun and immersion. Yes there are games on smartphones that are def fun and or immersive but mostly are quick fixes while the real experience is on handhelds.

Smarthphones do many things that make it worthwile but the majority of owners have it for one thing and one thing only: placing and receiving calls.

Sure there might be 50M users playing angry birds while at work, shopping, etc but how many go home and pick it over a much richer experience on the DS/PSP/XBOX/WII/PS3?

Your first paragraph falls into the trap of subjectivity. Don't assume that the whole market will share your values. Nintendo doesn't much need to fear losing the clientele who hang around sites like this, they need to fear losing everybody else.

Your second paragraph is obviously wrong. If phone calls were the one and only thing people want out of a phone, they would stick with a much cheaper feature phone. Smartphones are bought because they offer a lot more in the way of communication, information, and entertainment than a simple cell phone. That's why the smartphone market doubled in the past year, devouring the feature phone market despite being much more expensive to buy and operate.

Your third paragraph pretty much admits that smartphones are a better mobile gaming solution than handheld consoles. Why else would the DS and PSP be waiting at home with the Xbox, Wii and PS3? Is that the future of handhelds; something to play at home when the TV is already in use?

I agree that handheld consoles currently offer a richer experience than pocket computers. But this raises some important questions like:

How important, really, is that richness in the context of mobile gaming?

How much money (and pocket space) is that richness really worth to most customers looking to kill some time?

How much richer can the pocket computer gaming experience get?

This is assuming Nintendo won't do anything at all

If I were more wicked than I am, I could fill this with "blah blah, asymmetry of disruption, blah blah". Which would mean that N. being the incumbent would have to out-disrupt the disruptors by going even cheaper, even lighter, even simpler, even less bound to hardware - very hard for them - or face an uphill defensive battle they probably can't win.

But since I don't believe the disruption theories are universal enough to cover for evolution of complex intellectual products such as books, movies or videogames, I won't even pretend to play the part. Still a conundrum for those who do believe in the theory, or at least did when they could call N. the disruptor.

Your whole post relies on Nintendo not adapting or innovating for a 10 year period; even though Nintendo has been the leaders in this area in the industry. Also, the market you are talking about emerged years ago, and hasn't really impacted the handheld market. It's the same argument as "Consoles are doomed because the PC can do everything they can do and more.".

Typewriters, even electrical ones are specialist devices which are used to create documents. That speciality was folded into one general purpose device, much the same as car GPS makers are finding their products folded directly into the feature set of cars and cell phones. So just as a cell phone isn't as good as a GPS unit as a standalone unit, a cell phone definately isn't as good as a portable games device for playing games. However it is good enough for a large proportion of the market and it does come with a unique distribution model. For the cost of a single Nintendo game you could buy a veritable greatest hits of iOS games, and even if Nintendos quality never falters it doesn't mean they won't ever see market share eroded.

The idea that PCs have never hurt consoles and vice versa is based upon what empirical data? If a large number of people are sitting down every night to play Farmville and go on Facebook that reduces the time they have to play console titles. Remember, Farmville as a game is possibly the biggest game in the world in terms of time sunk into it.

So whats to stop Nintendo from establishing their own online business model? Well for starters, they haven't really started now. It takes time to develop an online content distribution business and it appears that Nintendo still haven't started on theirs. Beyond this if they start to offer the same types of mini games as cell phones, they could erode their market share on their own platform and introduce serious pricing pressure on their own games. So taking on the smaller and more focused games could be counter-productive for their own first party revenue structure. Finally which phone company would they partner with? None of them has the overall market share dominance, they would go from top of the handheld market to middle of the phone market.

I wasn't saying that they would exit the handheld gaming market, I was saying that they were threatened in the handheld hardware market. Theres no reason why their software couldn't continue if they found their hardware situation untenable.

Take a look at this: http://www.vgchartz.com/worldtotals.php?name=&publisher=245&console=DS&genre=&minSales=0&results=50&sort=Total

The biggest thing to note about that list is that the highest selling software titles are the least defensible as genres against equivalent mobile phone games using touch screens. It is only when you go down the list of top selling DS games that you start to see the games which cannot be done adequately on a touch screen start to match or exceed the numbers which can be done as well or better. The games which are threatened are games like Brain Age, Mario Kart, Nintendogs etc or their highest selling software. Games like Zelda may not be threatened nearly as much but then again games like Zelda simply don't sell like their main software titles. The point where the two markets intersect is the core value of the handheld market which is pick up and play, maybe for less than 15 minutes at a time.

The last time Nintendo's own software dominance was threatened was when the industry faced an explosion of new development talent coming in and shifting the balance of talent in the industry. This was when the PS1 came out and it continued to the PS2 but died down with the current generation and the old stalwart publishers have posted large losses ever since. In the current console market Nintendo is safe because the number of new ideas coming out or new paradigms has dwindled and nothing really looks threatening at all. However in the handheld market there has been an explosion in the number of talented independant developers and an explosion in the number of new ideas flooding the market. As Nintendo makes the likes of EA look like an old bull put out to pasture in terms of agility, smaller developers can and will make Nintendo look like the same.

If you take a look back at the kind of games which launched the massive Gameboy handheld back in the day, which game stands out? Tetris. The kind of simple, addictive pick up and play kind of gameplay of Tetris is exactly the same core value of the major games you see on iOS and other mobile phone game stores. Only this time the distribution cost is a fraction of what a developer would have to pay to release a game on the DS with the marketing costs also being substantially reduced because the phone devices are also communication devices and word of mouth is a couple of clicks away. The threat here isn't 'better than Nintendo' its 'good enough but more convenient'. The MP3 destroyed the CD with poorer music quality and convenience coupled with a lower price. Maybe those cell phone games are poorer quality but they are convenient and they come with a lower price. MP3 quality didn't stay poor forever, as game quality on the online mobile phone stores has improved likewise.

I understand your argument but at the same time seems like you're equating like materials against drastically different points.

MP3s sold killed off CD sales because you could ge tthem from home (and for free for a good long while). Sure, if Sony made a website where we could universally connect from anywhere AND play 95% of the games for free without ever having to go to a store, then yes, I can agree that it'd be like the CD vs MP3 connection.

I do understand your point about Tetris too, just like how Bejeweled has far outsold any single console game in existence - available on every computer and cell phone to date. Ultimately, it depends on the audience. I for one hate baseball games, and will never ever buy one, whereas I'll buy a horror game as soon as it comes out.

What's going to have to happen to make your suggestion be true is that someone is going to have to out-innovate Nintendo. Not an easy or cheap task to accomplish.