You can look at it two ways, the other way is that Nintendo only has half the market, you could say their values only work half the time. So in that case, wouldn't they be vulnerable to say Sony or Microsoft if they could address 100% of the market?

@Destroyer of Knights i suggest you read up a little more about the disruption technique you've just stated the whole point of business disruption

same @ Squilliam

You have both given a response that both Sony and Microsoft have and are doing hence falling into the trap, you have to look past the glossy covering

I don't think you understand Disruption.

Disruptive games are like Wii Sports. Wii Sports will never be highly rated, because all the game reviewers are 'hardcore'. They'll say 'this game's dumb for stupid jerks we hate. We want it to have 1080p graphics with gore and blood FOR NO GODDAMNED REASON. Make all the Miis naked, and perfectly rendered. And instead of baseball bats, they need swords. And instead of Baseball, make it God of War.'

The hyper-casual audience says "Hey, this game's pretty fun", and gives nintendo a ton of money. (Wii Sports basically sold the Wii. Everyone saying "The wii is a toy that people keep in their closet for parties" is really saying "People are willing to pay 250$ for Wii Sports") Nintendo uses that money to bankroll improvements in the motion technology, and puts out a product that's a teensy bit more hardcore than Wii Sports. Say, Mario Kart Wii. And the crazy thing is? Mario Kart Wii, with motion controls and cartoon graphics, is actually pretty damn realistic. About as realistic as, say, a PS2 Gran Turismo. Gran Turismo has better, more realistic graphics, but you play it using a joystick, which is completely unnatural and unrealistic.

So the semi-casuals and the hyper-casuals say "Hey, this game's pretty fun", and nintendo gets even more money (MKWii has sold almost 16 million copies, more than any Gran Turismo game, including the ones on the PS2 that has almost three times the install base of the Wii currently. And MKWii's still selling.) And Nintendo gets millions of dollars, and they invest it to make the Wii Motion Plus, which is like the Wii motion controls, but a little bit better. And that pushes the market upwards, closer to the hardcore territory. Next, the Wii gets Sports games. 

And every time the motion controls steal a genre, they add new values. I have no desire to ever play a racing game without motion controlled steering (or a racing wheel, but I'm not gonna pay for one of those). I don't really want to play Resident Evil 5 until it gets a wii port, because RE4Wii controlled perfectly. And honestly, could you imagine somebody releasing a 'fun party game' on either the PS3 or the 360? Would you play a 360 Bowling game, with photorealistic graphics, but you play with a 360 controller?

I honestly don't think Gran Turismo 5 or Forza 3 are going to sell well. They don't have motion control. And if Sony and MS want to retake those genres, they're going to have to move to the expanded market, where their previous advantages (super awesome graphics) become liabilities (high price and large size).

Oh, god. I think I was channeling Malstrom there for a moment.

@Zeljedi and Squlliam

There is nothing saying that the either company will go out of business immediately because of their moves to copy the company that disrupted the market, but over the next 5 to 20 years their attempts to attract gamers outside of the demographic they control can destroy the companies existing fanbase to a level where they may not recover.

There are (probably) many ways that this could happen, but the most likely situation at the moment would be that Sony and Microsoft release their add-ons and only really develop competition for the simplest and most gimmicky games that the Wii currently has. Being that the Wii's userbase is so large, for every one of these games Sony or Microsoft release the Wii will see several similar titles which are (generally speaking) higher quality in the same timeframe. The result of this is that Microsoft and Sony would be seen among these gamers in a very negative light heading into the next generation.

At the same time, since Nintendo made their control method the focus of the console every game is designed around it, and the steadily increasing third party "Core" games support starts to find ways to use the Wiimote (and Wii MotionPlus) in ways that greatly increase the quality of the game and can't be replicated on a conventional controller. Over the next few years, the Wii gains "Cred" with the "Core" gamers and maintains most of its support from the mainstream and expanded market.

Now, since Sony and Microsoft release these add-ons to their system late in the generation they believe that the momentium from these systems will prevent them from having to release a new system in the near future; and since the systems still have good graphics then there is little motivation for people to buy newer hardware. Nintendo takes the opportunity in 2012 and releases new hardware which greatly increases the quality of their overall control method and makes a (very) noticeable improvement on all the technical features of the PS3 and XBox 360 while retaining a very affordable price of $300 while bundled with a game.

Much like the release of the PS2, their next system quickly kills of both conventional and expanded interest in their competitions products and they rapdily build a large userbase. By the time their competition ramps up to release their next console there could be 30 to 60 Million systems already on the market, and even after their competition releases their systems their total combined sales is below that of the next-Wii which means that they are falling further and further behind.

I don't know if this is going to happen, but the decisions made by the companies do not seem unrealistic, and (in the past) similar things have happened. When you compare it against the SNES the N64 didn't do that poorly, and the Gamecube seemed to be a step (or two) towards correcting all the problems the market had with the N64, and yet the disruptive nature of the Playstation and the earler release of the PS2 meant that the generation was (basically) over before the Gamecube could launch.

Actually I think this is a good time to bring this issue up. It seems to me that Microsoft and Sony (to a lower extent) fell into a trap, investing in their motion control technologies and pushing them out too early.

It seems to me that Microsoft is rushing their impressive tech out of the door without regard to its real usability for games (and practicality, do they really expect us to reorganize our living rooms so that a camera can see our whole body?), while Sony is playing catch up with a copy of Wii MotionPlus functionality. They might have done better by keeping their motion stuff internal until their next console.

Now Nintendo knows perfectly well where their competitors stand, and will likely one-up them again in the next generation. More importantly, Nintendo seems to make the games and the hardware at the same time, ensuring their development plays well together (something I suspect MS and Sony aren't doing to a great extent).

It is pretty much the iconic disruptive product. The only thing that doesn't make it the perfect textbook example, is that it's happening too fast. Disruption normally takes longer to get going (if it was the textbook example it wouldn't have been sold out straight away, it would have taken a few more months to gain momentum).

Of course, it's also Blue Ocean, but they're not mutually exclusive strategies.

I think you didn't understand me. Both for Sony and Microsoft gaming is only a part of entertainment divisions and main revenue sources lie in other products company sell, while Nintendo is vunerable to situation on gaming market much more and it is Nintendo that can repeat Sega scenario if they screwed up next gen.

Also you assume Nintendo can kill competitor with better more powerfull product in 2012  for $300.  That's not going to happen as they seem to prefer profitable from the start model of bussiness so IMHO Wii 2 will be kept at HD ready levels like X360/PS3 to keep good margins.

And why would MS/Sony kill audience they have ? It's only possible  if they throw away all the hardcore games they have and force all the 3rd parties to work on Sports/casual titles..

While I don't agree with Squirrel in everything he posted, in this part, you made the mistake. 

Nintendo won't screw up next gen, because they don't allow themselves to screw up. As you said, they will always sell for a profit, so even if they repeat a gamecube, they would stay in business. 

On the other hand, Sony and Microsoft are allowed to screw up sometimes. While this seems to be a strength, it has its disadvantages: They started to base their whole strategy around bleedig money for long term benefits. This led to Sony's razor and blades model, that basically gave up big profits for marketshare. Now the PS3 failed, and they are here with no market share, no profits.  They are starting to lose their first reason to stay in the business. 

Putting unlikely next-gen predictions aside, look at it this way: Why both cases are unlikely, what is more plausible? That Sony doesn't release a PS4, or that Nintendo doesn't release a Wii 2? 

Exactly. 

I don't think it necessarily needs to be in Microsoft's plan to release Natal this gen. They have introduced the world (most importantly the gaming media) to it. Games in the future will be compared to it even though it doesn't exist at retail. Reviewers had started to get excited about WM+, but now can pass that off as simply more "waggle" until a "truely high definition motion experience" comes along. Reviews mean little to the blue ocean, but this could just be Microsoft defending their mature-core by teasing something casual.

Then with the marketing push of next gen, they try to push this out to expand their audience. This will be harder than they think though.