They haven't had to. Why would they? It's not as though a new cast makes a game any better.

Nothing leads me to believe that it is guaranteed but alot of things lead me to believe it is probable.

(1) They are the underdogs

(2) Nintendo has a established a new market.

(3) They desire that market and will work towards obtaining it.

(4) They have resources and will make use of them to achieving (3).

The PS2's success where for different reasons the Wii , the success of the PS2 follows closely from the PS1's and the huge software support Sony was able to aqcuire in that period. The Wii lends pretty much all it's success to the innovation it's technology which enabled to attack that new demographic. People knew Playstation because it offered a unique selling point : it's libary . People know the Wii because it offers a unique selling point : it's libary based of the innovation in the Wii. People only come to know the console when it has something worth offering , not at any point before that , people will soon forget the Wii if a better alternative is released just as they did the PS2.

I look at things a little differently ...

Throughout the entire previous generation, Sony and Microsoft were growing more and more focused on targeting the "Hardcore" demographic under the assumption that the more "Hardcore" a system becomes the more popular it will be. As a result of this, they largely ignored and took for granted the broader demographic of gamers. Nintendo’s release of the Wii was designed to target these gamers.

Nintendo's success was quick and easy because there was almost no fight for these gamers from Sony or Microsoft ... Stealing these gamers away from Nintendo is (at this point in time) about as easy as stealing the "Hardcore" gamers away from Sony and Microsoft. The gamers know the brand are happy with the brand and the company who controls their demographic is not going to give up an inch without a fight.

I'm with Happy Squrriel's explanation. The former markerleader Sony sabotaged its own market by focussing more on a niche. And Microsoft followed them  in an foolish attempt to cut them off.

1. Nintendo doesn't have to since they already have a lot of IPs in the last 20 years.

2. Nintendo has enough creative talent to create new IPs tailored for their new console and handheld

One thing I also don't understand is that people would bitch at Nintendo make sequels to established IPs and at the same time bitch at Nintendo not making any new IPs that they can create games for in the next gen and beyond.

I don't think my point disagrees with yours , infact I think it strengthens my argument . The fact that Nintnedo didn't have to battle for their new found demographic means that their future hold over that demographic is surrounded in mystery , what I think will is happen is that Sony and Microsoft will revise their strategies and attack that new demographic in a way their feeble attempts (Natal and Sony motion controller) have been unable too , this gen is really to late for a drastic change , the demographics have been set in stone.

I guess it can be argued both ways , Nintendo has captured a new market and no one really knows how they are going to play it from here , they could do more of the same with the Wii 2 or they could radicaly innovate their control scheme again (a risky move but one that is guaranteed to profit huge if the market responds well ) . Regardless of what Nintendo does  I don't think they'll be able to have the lead they had last time ,like you said Nintendo didn't have to fight for this new market . But now the markets been established and is experiencing expotential growth, both Microsoft and Sony are in on it now.

The whole point of Nintendo's strategy is that they acquire markets that aren't being catered to. That's why it's the Blue Ocean Strategy. You're talking about fighting over this audience, which is the red ocean(blood in the water attracting the sharks), and is exactly what Nintendo purposely got themselves out of. Microsoft and Sony I feel only have the capacity to try and fight over the audience Nintendo has acquired. I don't think they can utilize the mentality Nintendo has to seek out new markets unattended to. I derive this from their PR statements and executive interviews, which have never shown an inkling that either company really gets it. Iwata was talking about market expansion before the Wii hit. It wasn't some roll the dice thing. They are now talking about how to acquire new markets. He spoke about it candidly during the the E3 conference. At the same time, Sony and Microsoft showed us silly tech demos like paint splashing minigames and shooting cartoon guns around a room full of toys. You tell me who looks more poised to expand the market again.

If Sony and Microsoft manage to tap into Nintendo's current expanded audience, I believe Nintendo will have moved into catering to a much larger group of formely disgruntled or non-gamers. They will still put an effort into their old strategy, same as how we still get our upstream games like Mario RPG, Fire Emblem and Disaster Day of Crisis to give this traditionalist audience what they want also. Nintendo does fight in the red ocean, and puts up a decent effort, but the eyes are always on the real prize. Sony and Microsoft are basically now trying to go down the path Nintendo laid out, and as long as they do that, they'll never get further than Nintendo does.

Let's not underestimate Sony and Microsoft . I appreciate what your saying with the blue-ocean strategy but that principle could apply to any business of any size , I don't think that it is exclusive to Nintendo.  Now that the Wii is in 1st place you think that Sony and MS is unable to discover and attain new markets in the same way Nintendo has , well if...

(A) Sony hadn't have won the last two generations.

(B) This wasn't Microsofts second generation.

Then you might have had a point . I'll admit I was only thinking about the new demoghraphic that Nintendo created but the fact that I didn't consider demographics beyond this isn't important , this is considerations that employees at Microsoft and Sony are paid to make . The thing is , gaming has changed for good it isn't following historicaly trends as closley as it was in previous generations , I don't know why you can expect the same kind of blue-ocean mentality from Nintendo next gen but completley disregard Sony's and Microsofts ability to do the same.

But this is understandable , people usualy can't envision market underdogs achieving market dominance 5-10 years in the future , that's why the value of Nintendo is significantly much more than it was 5 years ago , that is why Sony lost marketshare wise this generation. And that is exactly why I have every confidence that Sony and Microsoft will discover and capitalise any on new opportunities.

Another point I want to make is does the blue ocean strategy make considerations for the the size of new markets. Example

[___TRADITIONAL_MARKET___][_______________WII MARKET__________][__NEW MARKET__]

As you can see the Wii Market is larger than the hardcore market and fortunatley for Ninendo the targeted the "Wii Market" arguably at the risk of loosing significance in the traditional market . If Nintendo were to attack the "NEW MARKET" then they may risk loosing significance in both the TRADITIONAL MARKET and the Wii MARKET , but you see the size of the NEW MARKET is lesser than that of the other two . My point is Microsoft and Sony may not neccaserily need to capture new markets , if Nintendo lost sigificance in either one of the existing markets then they risk loosing significance even when the discover a new demographic

NEW MARKET doesn't neccaserily mean more profit unless your able to retain existing markets , but the more markets you compete in the more the specs of your device have to conform to the needs of all markets , the less capable the device is at apealing massivley to all markets. This is already evident in the Wii , the traditional developers don't want anything to do with it , we're in a situation where the underdogs in the market are receving the bulk of 3rd party budgets /quality.

I think there's alot of question marks , everyone seems to think next gen will be pretty much the same (I think this is naive) . What I am certain of is that Sony (if they decide to compete) and Microsoft will not simply release the PS4 and XBOX 720 , we're going to see entirely different beasts.

I'm going to comment on the main portion of your argument. It's not that Sony or Microsoft can't expand the market. I'm sure if the right executives were working for them, and the right talent was pushing out exciting ideas, they surely could. I'm basing this on their PR statements, their interviews, etc. They just don't say "market expansion". They all read to me "Hey look! We don't get it!". Natal and dildo wand are just another "I don't get it" products, as I believe you said yourself earlier in different words. If I see their executives speaking the way Iwata was back in 2004, which laid out Nintendo's future mentality in advance, then I will change my opinion of them.

So no I can't predict the future. I can only look at trends and make my best guesses based on them. There is no current trend in my eyes that shows Sony or Microsoft in the midst of understanding the Blue Ocean strategy and possibly capitalizing on it. Their new projects, and the silly demos that went along with them, screamed "me too", and you know it. If one or the both of them are just being foolish and really have grander plans going on behind the scenes then good for them. I don't do empty speculation, so without any forthcoming warning from them, I'd rather not wager at the moment that the tide is going to turn. If in fact I get wind of some rumblings from one of the HD camps that they're beginning to get it, I'll be the first to change my tune and say "watch out for this one".

Because the ones they have right now are just so awesome that it can last them forever.