Since my first thread noting the hostility of third parties against Nintendo, I took some time out to consider what the situation looks like from their perspective.  I realize now they are actually caught in a dilemma: Although it's clear that Nintendo is going to dominate on a level even the PS2 could only have dreamed of, developers have already invested in talent for the development of high definition content, as I had pointed out.  Furthermore, in some ways, developing for the Wii means that many established IPs would have to take a step back in some way, especially in graphics, which would be hard for anyone to contemplate (imagine, if you would, moving the graphical quality of Call of Duty 4's successor on the PS3 and XBox 360 back to an XBox-level baseline so as to include the Wii; not so appealing, is it?).  This could have been avoided from the beginning if they had planned around the specs of the Wii, then ported up from there, but circumstances compelled developers to collectively write off the Wii entirely.  The pressing issue to address, then, is this: What should third parties do in order to emphasize their strengths while accommodating the changed market?

From here, I see two possible ways forward.  The worst case scenario is the status quo, which represents a lose-lose situation for the majority of gamers and developers alike (but a short-term win for PS3/XBox 360 owners, and a bigger long-term win for Nintendo Co. Ltd. than most of us would like): Here, the third parties continue to focus development on the XBox 360 and PS3, setting the graphical bar at these systems while throwing the dominant Wii the scraps in the form of rushed ports from the PS2 and ill-conceived minigame compilations.  While this translates into short-term gains for Sony and Microsoft, third parties and ultimately the gamers suffer in this scenario, because the developers will necessarily miss the not-insignificant portion of the "core" market that went to the Wii (an IDG Research report revealed that, without Nintendo, the gaming market actually shrank by nine percent last year, rather than having grown 21 percent; combined with ever-rising development overhead for HD games, continuing to ignore Nintendo will lead to disaster).  In the end, the majority of gamers end up with shovelware, and the developers endure severe losses for not following the market, pushing a good number of them past the breaking point.  Stockholders will revolt, heads will roll, cats will live with dogs, and the balance of power will shift so far toward Nintendo that it just might give them the power they need to revert to Yamauchi-era policies.

The best case scenario, on the other hand, is a win-win proposition: This story involves the creation of new IPs built from the ground up for the Wii, ones for which there is no previous bar of graphical achievement to clear.  In these new properties, innovative uses of the Wiimote are prioritized, and graphics are tailored for the Wii.  For these games, the HD-oriented artists could instead focus on improving graphical style in lieu of relying on raw processing power to achieve their intended style, or spread out to work on multiple games instead of the one. Meanwhile, the bulk of established game series which have already established themselves on the horsepower of the 360 and PS3 can take a hiatus until next generation, or at least have their numbers in development for the PS3 and 360 culled (as fun as it is to shoot Nazis, there’s an absolute glut of FPSes on the 360 in particular).  This outcome would inject desperately needed new IPs into the gaming industry, while simultaneously tapping the demand of the dominant system properly and absolving developers of having to take a step backwards in order to accommodate the market.  This means that we shouldn't expect the continuation of established game series on the Wii: Of course, market forces will still compel developers to retain elements of the familiar, meaning the end result is that we should expect new IPs, ones which will still resemble the old, but fill the demand on the Wii far more ably.

Of course, as much as Nintendo has dominated, it still has the final stretch to go when it comes to securing their dominance in third party sales figures.  However, it has already been proven that Nintendo is going to dominate – no one but the most delusional fanboys will believe there is any way the situation will suddenly and terminally worsen for Nintendo.  The question is, where will third parties go?  There is a way out for their dilemma, but who among them is level-headed enough to be the first to realize the exit is right in front of them?  We already know they're resolute to the point that they will not take one step back to adjust to the market, but perhaps they will instead take one step sideways toward that end.

TL;DR edition: Third parties are caught in a situation where their supply doesn’t match well enough what the market demands.  The worst thing they can do is what they're doing right now.  The best thing they can do is start coming up with new IPs tailor-made for the Wii.  That way, most everyone wins in the end.

Forgive me but I haven't read your post yet I just wanted to say that I love your thread title.

The Wii doesn't make a step backward but sideways.... So many discussions if the Wii is really next gen or last gen and then you come up with this;.

+10 Respect.

The Wii has a few problems - It costs more to develop than the HD consoles now for an established player after you take tools, training, risk of new franchises into account.

Furthermore is Nintendo actually supplying sufficient development kits now to all those who want them?

I read your post now and it is great.

You showed me aslo some things that I didn't know:

(an IDG Research report revealed that, without Nintendo, the gaming market actually shrank by nine percent last year, rather than having grown 21 percent; combined with ever-rising development overhead for HD games, continuing to ignore Nintendo will lead to disaster).

You should making more of them and join VGCHARTZ as an news editor (but then bring up your articles).

Edit: Your canadian +100 Respect.

It will be a bit of both, of course. How far it goes towards the second option is the question. And how much do new IPs get rewarded? So far, it doesn't look real good. Zack and Wiki and NMH aren't very high flyers. But were they profitable? Probably. And if they can continue to grow a bit here and there as Wii sales grow.

And if the alternative is making high cost games for PS3 and X360 that have a much better chance to lose money, then more will turn to the Wii as well.

The IDG research report should be more specific. Without Nintendo, it would have shrunk from last year when Nintendo was or wasn't counted? And obviously it's going to shrink if you take out a certain console maker. If Nintendo is taking hardware and software sales from their competitors, then counting them out would make the market appear to shrink.

Wonderful post great points and yea that was New article worthy; keep it up.

@Renar - NMH was apparantly profitable and so was Zack and Wiki, also neither games admittedly recieved any proper marketing might.

NMH ads appeared on certain sites but no television ad's no bulliten boards, no radio bits nothing.

But it's budget was low from a notoriuslly niche game developer.

 I figured that the main point of contention with my post would be the suggested re-allocation of the current HD console-oriented talent toward different ends - I hadn't thought very deeply into that one, and was operating on the assumptions that HD-oriented talent could be easily redirected toward non-HD development, and that the development of HD assets simply required more artists.

Well, Epic am cry.

Epic should of stayed in PC, the userbase there is very adjustable and migrate very well for what they do.

But yea they did start the water works not too long ago... I can't figure out why the R* VP basically said F' Nintendo (Casual games) the other day.

The Sony 1st parties are very vocal also... I don't know why unless their under contract.