Satoru Iwata, President of Nintendo, gave yet another news conference that demonstrates why Nintendo thinks very hard about its business, technology, and games.
I truly admire what Nintendo is doing and I am only sorry that they have been so difficult to partner with (sigh).
First, their goal is to not lose money on the console hardware i- this breaks with the tradition of a lot of game consoles where substantial losses in hardware are recovered through licensing fees. This reliance on licensing fees pushes costs and risks onto publishers and developers reducing game innovation and flexibility for business models.
Second, by making the Wii cheap, Nintendo makes the threshold for decision to buy easier. Most people will not think nearly as hard about a $250 purchase as they do about a $500 or more purchase — these mental pricing thresholds are very important and Nintendo has a huge advantage compared to both Microsoft and Sony.
Third, Nintendo is joining Turner's GameTap in re-monetizing its back catalog. These completely developed assets have essentially been worth nothing as they have been considered "obsolete." By charging between $5-$10 to download them, Nintendo is essentially printing money ... for the cost of bandwidth (pretty low for these older games), and no retail channel or others to share revenue with, every game sale goes right to Nintendo's bottom line.
Forth, the unique design of the Wii has excited developers, but, more intriguingly, it is going to make it a real pain to make a multi-platform game. While it may be possible to port between PS3 and Xbox 360, the Wii platform will essentially stand-alone. This means more exclusive titles and, with good licensing terms, more games. If Nintendo really works to court third-party developers, they will be in a great position to dominate on content.
I think Nintendo understands that its biggest threat is the PC. By building a compelling platform that is very different from a PC, due to the controller, they have created a real market niche. Also, if they can replicate Brain Age and Nintendogs on the Wii, they may reach a much wider audience. Their threat to allow casual, downloadable games, could be icing on the cake — a farm league recruiting system to nurture new developers.