I think you over-estimate how expensive it would be to produce more powerful consoles than the PS3 or XBox 360 ... Today for a little more than $100 you can buy a Radeon HD4770 graphics card, while the PS3 and XBox 360 will play games like Call of Duty 4 at 720p@30fps this inexpensive graphics card can play the same game with higher detail at 1920x1200@60fps. In 2 to 3 years time, as we move to the 32nm and (potentially) the 22nm manufacturing processes on CPUs and GPUs, I think it is safe to assume that very inexpensive and low energy consumption hardware will provide a noticeable improvement over the PS3 and XBox 360.

In general, the discussion of what Nintendo will or will not produce was not the point of my post anyways; and my post wasn't (necessarily) what my expectations were either. My point was that assuming that the HD console manufacturers will be fine in the future and will be able to maintain their marketshare after Nintendo has successfully distrupted the market is foolish. There is nothing saying that Microsoft or Sony's strategies to expand their demographics will be successful, there is nothing saying that Nintendo's strategy to expand their demographics will be unsuccessful, and how each company positions themself in the next generation could change the look of the market entirely.

The constant discussion from Sony and Microsoft about long lifecycles and their late-generation moves seem to indicate that there is might be a period where people are highly interested in entering into the next generation, that companies will not be seen in a negative light for releasing a console early (because it won't be that early), you will be able to make noticeable improvements over all consoles at an affordable price, and Sony and Microsoft will continue to be focusing their efforts on their current console. If this happens there is an opportunity for Nintendo (or another company) to enter into the market, and become dominant in all regions before Sony and Microsoft are able to enter into the market.

Not at all. You were able to perfectly explain the upstreaming of the gaming market and didn't have to sound like a douchebag while doing it. I'm still waiting for Malstrom to do that.

I find the great thing about posting this thread is how people's comments fall into the Sony / Microsoft mould without even knowing the true extent of the disruption business model

Consider this. All the so called experts have been saying since launch that Nintendo would be forced to come out with Wii HD before this generation ends to remain competitive.

In fact, the very reverse has happened. Instead of Nintendo needing to compensate for their competition's strength - HD graphics, the competition has been forced to try to emulate Nintendo's strength - motion control.

The motion control that Sony and MS have shown - while impressive - does not suit the games that those systems specialize in. They may get a port of Boom Blox and motion controled Grand Slam & Tiger Woods (once they have enough of a base to justify EA spending extra $$ to support the motion control) and possibly a motion controled GT5 / Forza 3. But neither would work in the FPS/TPS/Action genres that they now dominate do to lack of an analog stick or alternative for movement. Both will be extremely late to the game with flimsy support for thier motion control devices.

So it's not going to hurt Nintendo any.

On the flip side, if Nintendo did come out with a Wii HD now, you could expect every single 3rd party HD game to immediately be on it with full WiiMotion + support, IR support, etc. And it would not only be comparible to PS3/360 gameplay-wise but would control much better. Plus it would be fully compatible with all Wii games and I'd expect they'd continue to sell the Wii as well at a lower price point. That 1-2 combo ($250 Wii HD, $150 Wii) would be a crushing blow to MS and especially Sony who still hasn't even achieved profitability. Plus it would totally negate any hope of Sony returning to dominance with a $300 PS3.

However, I'm not sure Nintendo will do this. They have never specialized in those genres anyway and their profit margins are greatly improved without HD development costs. Plus they've already won this generations without HD so they don't need to. But if they do decide to take the fight upstream, their competition should be very, very worried.

@Gamerace: I agree quite a lot with your post, just a minor observation: it looks like Sony's control scheme could be equivalent to Nintendo's, if they allow using one controller per hand. In fact Sony could get some pretty easy ports of some Wii games (if the install base justifies it of course).

I believe Nintendo will do this in 2012 or 2013. That year, they will announce and later release a next console with better graphics than the HD consoles to capture the upstream completely. With new, better interfacing and a Wii Sports-like killer-app they could move over all existing downstream customers and attract new ones. Maybe that will be the elusive Phase 3.

Let me put it like this: an HD Wii with a Wii Sports-equivalent(and perhaps a 2D Mario? Whoa! That's be big!) at launch, coming out before Sony and Microsoft consoles could destroy everything, granting Nintendo something resembling monopoly.

@NJ5: Sony's small installed base plus the cost of two motion controllers and a camera(you need a camera for the thing to work, right?) would make Sony's motion device way too inacessable. Also, they're too late to steal Wii sales with a motion control add-on.

@Mazeme and/or NJ5

You guys seem far more knowledgeable on this disruption thing than I am, so could you answer my question below?..thanks :)

Hmm....with the way Nintendo is dominating the charts in both hardware and software sales, would they really attempt to make a serious move at the so called upstream customers?...if so, what risks could be associated with it?

No one asked me, but I will try to explain it as I understood.  IMO, you misused the term "upstream".

There is a downmarket of custumers with low needs and interest. 

There is an upmarket of devoted customers. 

At the moment, these are mostly similar to the "hardcore" "casual" stereotypes. Making games for the upmarket is what Sony and Microsoft does. 

Upstreaming is the process of making games for the downmarket, that makes them more interested in the product, and turn them into the new upmarket.

Note, that at this point, this new upmarket is the "expanded market", not identical with the old hardcore. At this point, they are something like "hardcore casuals", soccer moms, girls, kids, and old people, who are actually hyped by Nintendo games, and wait for the next big thing.

Contrary these popular beliefs, upstreaming doesn't simply mean abandoning the "casual" values, and beating Sony and Microsoft at their own game. It is more like developing these values to the point when even most of the "old hardcore" find it good enough, and convert, but this is only a side effect, the main goal is to build up a new upmarket. Mario Kart Wii, NSMB Wii, and similar titles are good examples for bridge games, that connect the two different values. They make the expanded market get used to the old franchises, and make the hardcore gamers get used to the new values.

Wii Sports Resorts is probably one of the best examples for a game that is more upmarket than its predecessor, while being made for the same audience.

For such an uncompleted project, I don't see the Wiimote as being entirely disruptive.

We're 3 years in, and the only hailed games using the WiiMote are casual games. For disruption to happen, I'd think you not only need to disrupt what a gamer is (which Nintendo has done), but also bring vets into the fold, which Nintendo has certainly NOT done.

3 years, and I'm still waiting on an RPG that I can purchase a Wii for. Looks like NATAL may even beat them to the punch.

It's only been three years. Most disruptions take far longer than that. And I expect it won't be that long before the disruption is complete, I'd give it until the end of the generation.

Oh, and of course Nintendo has brought vets into the fold. Just because it hasn't brought the HD gamers in completely, doesn't mean it hasn't brought in veteran gamers.