Nintendo will lead innovation again; just not with the 3DS

When I wrote a year ago that the 3DS could be in trouble, I learned a couple of things:

1. Nintendo fans are passionate. Really, really passionate.

2. Saying any forthcoming product from a company with a 10-million-man army of fans could be in trouble will result in people calling you lots of names. Lots and lots of names.

Still, Im glad I wrote it, because I tend to think that,with this weeks news of the devices price dropping from $249 to $169, I was largely right. My thinking went as follows: The 3DS was built with the same business model that the DS and the Game Boy employed before them, centered on dedicated hardware and the sales of expensive game titles. Its a model that, with the arrival of smartphones, tablets, app marketplaces and multiscreen gaming, has become a bit antiquated.

Now, dont get me wrong: There are tens of millions of people who will buy the 3DS. There are probably that many core Nintendo fans. But what were seeing more and more of is that the casual fan who drove the DS into the 150 million unit territory is increasingly spending his or her discretionary dollars on other devices.

The biggest vulnerability is with young kids, who are increasingly putting tablets, smartphones and other multitouch, multipurpose devices on their shopping lists. While its too early to say how many have tablets, smartphone ownership! is alre ady at 33 percent for the 1524 age group in the U.S. That number will only grow.

Butits not just kids. The gaming industry itself sees a tablet-filled future. EA, which just acquired multiscreen casual-gaming giant PopCap, has said itsbiggest growth is coming from the iPad and that tablets are where it sees the future.

Is the 3DS the device to lead Nintendo into another decade of growth and profitability? As I said before, probably not. What will? Its unclear, but if Nintendo wants to repeat the success of the DS, it will need to once again completely reinvent handheld gaming, offering a leap forward as big as it did with its dual-screen, touchscreen gaming device. It will also need to acknowedge the new reality where tablets and smartphones are evolving at rates faster than anticipated even a few years ago. Gaming on these devices will only grow.

Im looking forward to whatever that new innovation or breakthrough is beyond the 3DS, becauseNintendo has reinvented itself many times in its life and will almost certainly at some point lead the gaming innovation cycle once again.

For more on the future of handheld gaming, see my weekly update at GigaOM Pro(subscription required).

Image courtesy of flickr user redoxcun

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