Actually by moving against Nintendo, they realize that Nintendo is a threat to their market, that their market is in fact shrinking, the reasn is, the risks at moving into Nitnendo's ocean, is they risk alienating their long time supporters, and creating a backlash, so in fact the only reason they would try to move against Nintendo and co-opt the disruption is because they know its a threat.

Actually the idea is how the disrupted responds, is the most important, see if they successfully adopt the new market principles, they can prevent the disruptor from moving upstream and have succeeded in co-opting the disruption, right now the NATAL and Wand don't show signs of being able to do that, they show that MS and Sony don't really get what Nintendo is doing.

Actually the market is moving away from the old one, which is why the old market is faced with so many financial issues, a healthy market doesn't have the problems that the HD market is having, with companies laying off by the boatloads, and developers and publishers going under. There are signs of a dying market.

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You make some good points, I can't deny it, but you leap too fast to conclusions, maybe.
About the old market shrinking, I suspect it's still more or less slowly growing, instead, but obviously Nintendo still having the whole new one all for itself, while MS and Sony must divide the old one, makes their slices look smaller.
More than a threat for the old market, the new one is a missed opportunity for Sony and MS, if they don't deveelop anything to get a share of it.
But this gen is roughly at the middle of its life as the latest one, and at 1/3 of its life or even less if we take into account also the years the current consoles will be sold as low end models when 8th gen will be the latest. So it's way too early to deduct a definitive trend. I agree with you that Wand and Natal won't grab significant slices of new market from Nintendo, I don't agree that the old market sends signals of shrinking, good games sell well, HW sells decently, and bad games and/or bad management do disasters, as they always did, nothing new about it.

Problem is if it was gorwing, we wouldn't be hearing of devs being shut down, people being laid off, companies taking huge losses and companies trying to push things like DLC or kill used game sales and rentals.  Its even deeper than just Sony and MS, its the developers as well, look at EA, and Kotick sold most of his Activision shares, meaning he's ready to jump ship when the thing falls apart.

It used to be that even bad games wouldn't kill a studio or a publisher, now with all the costs, one really bad game can put a dev on the road to shutting down, like Factor 5, the New Market on the other hand is growing and is wealthy and healthy, where games can make far more than their development cost, and sell for months even years, that's another thing, the old market is very front loaded, the new market has strong legs, if a game doesn't sell like crazy in its first two weeks in the old market, its dead, in the new market, it can sell for years slow and steady, which is why you end up with these monster titles with 20 million plus sales

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Not every developer is in a bad shape, but only Nintendo looks able to do monster titles selling more than 20 million. It looks like every other one has the possibilty to do bad, good or very good, but only Nintendo can do monstruosly good this gen. But even Nintendo can achieve this only on a selected few titles amongst its many ones. This is maybe the most disrupting thing, no SW house looks able to do as much, but maybe this is also the thing that pushes some SW houses to avoid direct competition with Nintendo. About excessive costs threatening SW houses in case of even a single flop, you are right, this is a degeneration, and I'm persuaded HW developers should provide better dev tools to help lowering these costs. There should be also more game development courses at universities, and they should be kept reasonably up-to-date, to reduce training costs for SW houses.

Not every, but usually only the really big developers are doing ok, and really none is doing as well as Nintendo AFAIK.  This is a bad sign for the old market, as it means games have to sell better and better to make a profit, or they have to increase profit margins, of course the problem there is, people are used to $50-60 games, so higher will not be well received, people aren't ready for Direct Download consoles, as the PSP GO proved, used game sales are here to stay, as are rentals, so really the old market is in a lot of trouble.

Even if better training and tools occur, there is only so much of a cost that they can reduce, a lot of the cost is incurred in adapting assets to new games,  and these costs will likely rise as companies keep trying to eke out more out of the 360 and PS3.

Either the old market must reduce its costs and drastically or face demise, because outside of normal population growth and multiple console households,its not growing, and those increases are not enough to cover the rising costs of game production.

Nintendo was brilliant in keeping the power of the Wii down.

PS360 sales added together are still incredibly lower than last generation sales at this point. 

You already claimed that Nintendo didn't take away a part of the old market, so apparently, the old market is now smaller than the PS2 alone after a similar time. 

Nintendo's been eating into the old market as well, according to NPD 70% of Wii owning households also had a PS2. Wii/DS pretty much took near the entire "casual" market as well as expanding into new markets (children, elderly, women, etc) and bringing some lapsed gamers back in (in Japan especially). 360/PS3/PSP are left with the shrinking "hardcore".

ookay? what was the message?

Let me guess, you're a big fan of using AutoCAD to design...

Facts actually do not back this.

When 2009 is over and people do the revenue comparison with 2008 they will realize that HD market in $ was fairly stable while the Wii market saw a very significant decline that year...( due to the limited numbers we will only be able to compute this for the US thanks to NPD though).

So basically this new market Nintendo supposedly found is collapsing very fast...