It is when you overproduce a million copies, or take the risk to not meet demand and losing momentum.

I do agree with one thing, while we might not see a game industry crash like the 80s, we are about to see a Great Gaming Depression. I have a feeling this gen for all 3 - Nintendo, Sony and Microsoft, will not reach anywhere near the number of units sold in the Wii/PS3/360 generation.

Look at the profit margins and studios closing.  And the industry is DEMANDING that new consoles get releases, because they think that fixes things.  People can't see the future here.  How many more playing Wolverine but can only carry 2 weapon FPS titles do we need?  The growth is in the iPhone/iPad settings with much smaller costs.

So we have a majority of the industry hemorrhaging money to create games, but it's Nintendo's business model that isn't working. Right on.

Starting with the 3DS, Nintendo has shifted to a model of selling systems at a loss, to be able to compete.  The Wii U also sells at a loss.  Nintendo's business model is following that of everyone else.  It is also at risk of losing money to.  So Nintendo has abandoned its business model of the past.

http://www.nintendolife.com/news/2013/02/3ds_eshop_version_of_gunman_clive_outsells_android_edition

Take the user base of the 3DS minus Japan (which this game hasn't released yet on Japan's 3DS eshop) vs iOS and Android.  Pretty soon this game will outsell both combined on the 3DS.  Now tell me where developers might stand a better chance of making real money on hand held gaming.

The 3DS wasn't intentionally sold at a loss. It was only that way because they made a panic price-drop to the console before they were ready. The Wii U is no different than the GameCube in the sense that it made a small enough loss at launch that could be recouped through software sales.

I will admit that bundling the 3DS with an unecessary gimmick led to an unecessary cost that should have never been there to begin with. 3D is completely useless as far as improving gameplay, so Nintendo would have been better off just releasing the 3DS as it is without the 3D function and just keeping the price point reasonable.

Thats Why I think ps4 and 360 will allow the software company to lock their games. Sony patented the tech.

I don't see a sustainable business model in the mobile gaming market until we see a massive contraction in the number of mobile developers.  There needs to be a mobile gaming "crash" for the good of that market.  The herd needs to be culled.

There is just not enough money to go around for everyone on those micro-transactions.

Thus the concerns that Cliff was talking about here.  Thing is that the barriers to entry are so low, developer studios keep popping up like weeds.  It will never really cull down.  When you have individuals who only have one place they can work, they won't move.  They have the dream of trying to make it, so they stick around.  I am speaking also about myself here.  For me, my job options are low pay tech support out of the house, with student loans under water, or trying to break into the game business.  Irregardless of how bad it is, I stick around.  And I keep cranking out content.  My area is tabletop games, but the ideas are the same.   Not everyone can be like Cliffy B and stay to the wayside.

Pretty much you see a version of the hell known as Second Life here.  No matter how much people lose money on it, they still stick in it, hoping to turn the table.

Thing about a crash though is that you will get things culled all over, but you end up with possibly people losing faith.  The funding to start capital dries up in the process, and everything contracts.  The whole movie-like experience you see people here crave will not be sustainable.