So you think that Nintendo is spending more and making more profit than any other developer?

No.

Developers are struggling because costs have risen so high.  Nintendo avoided the tech race this gen, and it paid off for them in a big way.

 The article is more explaining a trend of what has happend in the industry for many years. What it's saying is collective to the whole industry.

Exactly.

 The Wii has helped keep costs low but ultimately it'll succumb to this trend, marketing budgets will go up, games will get more ambitious etc. In some ways I think Nintendo are encouraging this, Wii Fit's marketing budget is beleived to be ~ $40 million in the USA alone (Can dig up a source if you want), I'm sure they're not marketing any other games that high but you can bet Wii Sports and Wii Music and Mario Galaxy etc were huge investments.

What you described ( or the OP artcile ) is a natural process because the growth of a company is tied to his core consumers and stokeholders thus if you want to keep the necessary growth for the ever increasing dimension of your company you must to accomodate who want generally increaseded updates ( core consumers ) and avoid risk and the unknown because stokeholders want certain safe performance. 

An incremental way of thinking work ... for a while but ultimately bring to demise because you generally cut out new potential customers and bore people because you don't risk.

What Nintendo is doing is a paradigm shift:

Who is a gamer ? Potentially everyone.

Is progress exclusively defined by photorealism ( an incremental aspect fought over for twenty years ) ? No.

Taking some old Iwata's words:

"On the other hand, what's more prominent in my thinking these days is how our industry is getting smaller. We are smaller in the amount of risk we're willing to accept. We are also smaller in how we define videogames. The list of genres seems fixed - shooters, sports, platformers, puzzles, and so on. When is the last time we invented a new genre? But as importantly, even within these genres, we have reduced the environments we use. The racing tracks, the sound tracks, the bosses, the heroes, are starting to look more and more alike. Consider Tiger Woods Gold and Mario Golf - each a successful franchise, but using two different looks for this game genre. Such variety is becoming harder and harder to find.

We are even getting smaller in how we define progress. Making games look more photorealistic is not the only means of improving the game experience. I know, on this point I risk being misunderstood, so remember, I am a man who once programmed a baseball game with no baseball players. If anyone appreciates graphics, it's me! But my point is that this is just one path to improved game. We need to find others. Improvement has more than one definition.

Finally, I am most concerned with what we think of as a gamer. As we spend more time and money chasing exactly the same players, who are we leaving behind? Are we creating games just for each other? Do you have friends and family members who do not play videogames? Well, why don't they? And, I would ask this: how often have you challenged yourself to create a game that you might not play? I think these questions for an important challenge for all of us."

 I'd say it's only a matter of time until EA or Activision or someone start trying to out-do Nintendo, push the budgets higher, market it even further etc, and then the trend continues and costs go higher, risks are more dangerous and most of what was detailed happens.

 This isn't a problem. If there are consumers that want high quality, high budget games like Super Mario Galaxy they will buy them. But on Wii there are people that want to buy small projects too, projects that don't have state of art presentation and that can be profitable on relatively average sales. This is due to how Nintendo build the philosophy of  their console. PS3 and Xbox 360 were always presented like avantgard of the cinematic trend, the hollywood style of thinking is high risks/high gains and cut out the small/mid size publishers, if not for digital distribution systems.

I want to note you that if Nintendo think that their profits are at risk and the indutry is ready for a revolution they will probably disrupt it again.

I don't think any console will change this unless we saw a revolution to the entire video games model (Digital Distribution could be that revolution) but for now the trend will continue on and on.

Digital distribution is really important because there are worthy products that could be very huge that simply can't find a way to be release and competitive on retailer shelves. Iwata made an example how Tetris, one of the most important piece of gaming software, would probably never be released in the current modern times.

However not all gaming products can be moved to DD system because there are certain advantages on using retailers like selling point. Also the consolidation process described in this thread probably will appear even on digital platforms.

Wow, those were REALLY interesting reads, especially the second one. As others have said, almost scarily prescient for the current market.

I'm not sure how many of you realize this, but the market that those articles were talking about (the early 1990s computer gaming market) absolutely did crash, and was completely transformed. The computer gaming market today looks absolutely nothing like it did back then. In the late 80s/early 90s, the big genres were flight simulators (Wing Commander), point and click adventure games (King's Quest), complex turn-based strategy games (Civilization), and ridiculously complicated RPGs or wargaming simulations (the early Ultima games). The games were played by a small group of geeky males, who were really the only ones who had personal computers back in the early 1980s when the market was first created. Needless to say, none of these genres really exist now...

So what happened? The games got too complicated and too niche to justify the (rapidly growing) budgets allocated to them. The market was able to stay alive because 1) many more people were buying PCs in the 1990s, and 2) the games changed in nature to appeal to a larger audience. Although there wasn't much of an Internet in those days, the old-school computer gaming geeks were vehemently opposed to these changes; this would be your "hardcore vs. casuals" debate, although no one used those terms back then. So we ended up with games like Starcraft and Diablo - fast paced and easy for anyone to pick up - instead of the ungodly complex flight simulators and adventure games of a decade earlier. The first-person shooter (Doom, Quake, etc.) also rose to prominence in the 90s too, which brought a new ("casual") group of fans to PC gaming, who were much more interested in action and much less interested in intellectual pursuits.

Now the thing is, the old computer gaming industry managed to offset its spiraling costs by consolidating into ever larger publishing houses and taking advantage of rising PC sales as the technology improved. Most people in developed countries now own personal computers, so that area for growth has slowed down enormously, and we're getting close to the end of the road for what consolidation of developers and publishers can achieve too. So what did PC developers do? Stick all their games on consoles as well! Outside of MMOs, how many major PC exclusive games are there? (Someone will take obj ection to that, but the truth is, very few.) And even this isn't working. Look at the current market: Take-Two (already a large publisher) needed to be directly subsized by Microsoft to complete work on Grand Theft Auto. The business model whereby Microsoft and Sony take huge losses to subsidize third-party development is extremely unstable, and can't last forever. (Sony probably can't afford much moneyhatting for a while, so expect to see few third-party exclusives come their way in the immediate future.)

In short, I agree with NJ5 that we're reaching a breaking point. You can only keep consolidating into larger and larger publishing firms for so long. The next step would be getting national governments to subsidize development costs, and that simply will not happen.

Wow, those were REALLY interesting reads, especially the second one. As others have said, almost scarily prescient for the current market.

In short, I agree with NJ5 that we're reaching a breaking point. You can only keep consolidating into larger and larger publishing firms for so long. The next step would be getting national governments to subsidize development costs, and that simply will not happen.

bolded part.