The birdmen eventually understood the DS. They realized it wasn’t about making retarded games (what they nicely label ‘casual games’
but hitting different tiers. They could make a simple RPG or a puzzle game to satisfy those customers on that tier. They realized casual gaming does not necessarily mean passion-less gaming.
While the journalists and analysts parrot one another with “casual gaming” speeches and rhetoric, keep in mind Nintendo’s plan. The strategy is to start with the Blue Ocean, seize and dominate the lower tier (which the industry doesn’t really care for anyway), and then slowly move upstream.
What happens when Nintendo moves upstream? Competitors have two choices:
1) Flee. Many companies will gladly ‘cede’ this new market. After all, this new market is not very profitable to the competitor and, besides, the competitor clearly is getting tons of money through the upmarket. While this choice works for the short term, the problem is that the encroaching company will swim upstream and begin to take customers away. Fleeing to the upmarket means ceding more and more of the market to the newcomer. Eventually, the competitor will have nowhere else to flee and will go out of business or be reduced to a niche.
2) Fight. Some companies realize that fleeing will ensure their demise so they stay and fight the newcomer for that market. However, the newcomer is patient for growth but impatient for profit. The competitor will likely be unable to defend that tier due to the newcomer gaining more profit. The battle becomes attrition until angry investors let the company’s managers know they do not enjoy them wasting so much money fighting over a market that has little profit in it. The investors will say the upmarket has plenty of profit to satisfy the company’s needs for growth. So, eventually, the competitor will decide to flee upmarket.