This is a nice thread and all but let me play the devil's advocate for one second.
The problem with Nintendo "carving out a niche" and "attacking the industry from another angle" and all these other nice terms for "choosing to not compete" are nice and all, but they are just happy, and false, sentiments that we, the fans of Nintendo, are trying to desperately graft onto our image of the company. It's like a sweet comfort - a way to tell ourselves that "Yes, if Nintendo realizes they can't compete, they'll still find a way."
That's nice and all but it doesn't work for the main reason that this is industry. It's industry. It's f*cking industry. You can't sit around and hope that you'll create a brand new niche. It's hard to do, it always has been. And Nintendo seems to satisfy themselves knowing that they can always appeal to certain groups of gamers (and non-gamers) instead of the broad picture.
That's the damn problem. That's the damn problem
in a nutshell. Why? Because you can't really survive doing that. Why? Because people hate buying a new system every five years
as is. How many damn times have you heard someone "GOD, EVERYTIME I BUY A SYSTEM, THEY JUST MAKE A NEW ONE, AND I GET TIRED OF BUYING THEM."
Nintendo at this point is satisfying themselves by thinking "yea, neat, we can make a system that will do x. X has never been done before. But let's limit ourselves and our potentials by making our system underpowered, and when we get another new great idea, we'll just release another system."
That doesn't cut it in the real world. People want a new system to last. At the current rate of technology, with the bigger leaps coming faster and faster, people are realizing that they are having to buy stuff faster. Where it was once 7 years, it's then 6. Then 5. Now 4. We are at 4, people. We are at f*cking four.
Nintendo is sitting back right now and telling us "well we can make a smaller, less powerful system, make the controller super neat, and give people old games." That makes them happy because it gives them a level of mystery, it reinforces the idea that they are innovators, and it gives them the possibility to make HUGE profits on old games.
But what happens when the 720/PS4 come out? Does Nintendo release a system that's as powerful as the 360/PS3 and tell us "well it will do this as well, something never done before" and expect us to be happy?
Gaming has far in the last few years and the userbase has grown SIGNIFICANTLY, and like it or not, the casual is the majority. And what does the casual do? They don't argue on net websites. They don't know E3 is going on. They are people like my dad opening up the newspaper and reading bullsh*t like "MICROSOFT TO CHANGE THE FACE OF GAMING," and other such nonsense. They see the numbers - 100 hojillion polygons on 3 processors - and that sticks. Big = better. That's the American mentality. Hell, HALO gets time in papers. Grand Theft Auto gets time in papers. MARIO DOESN'T. ZELDA DOESN'T. And I'm near the Houston chronicle, one of the biggest papers in the nation, possibly the world, and so you HAVE to be big to get into that periodical. But Nintendo hardly gets in there, they end up on page 8, with Iwata holding the Revolution, where as Gates was on page 1 and had instant recognition. People are going "WHO IS THIS ASIAN DOOD" and not caring much more beyond that. "Nintendo," like it or not, doesn't have the ring it used to. It doesn't command the recognition. My dad knows more about the Xbox 360. And this is a man who doesn't know sh*t about sh*t in terms of the game industry (not meant to be an insult, just calling out that's the typical, casual person - he only knows the big things, not the little).
In addition to all of this, Nintendo choosing to be underpowered on PURPOSE poses a huge threat to them because of third parties. Is their answer to no 3rd party support, or dwindling, crappy support at best, to allow people to get old games? I mean, is that it? "Here's this huge old library, take your pick for a small price."

? Wtf. PEOPLE WANT NEW SH*T. And if EA games is developing Madden 23 (and at the g*****n rate they are going, they might as well release 4 Madden iterations a year) for the Xbox 360 and the PS3, which are pretty comparable in the graphics game and I highly doubt EA will make optimizations for each system individually, it's going to PISS THEM THE HELL OFF to think "Well f*ck, we have to make it for the Rev too, but we need to scale the graphics back by about 40%."
That's
huge, people. It's going to piss off EA. What about Konami? Capcom? Ubisoft? If mature games are selling like crap as is on the Gamecube, and if they CAN NOT shake this tiku tiku tiku! image, and casual people are NOT aware of what is going on with the REV, and if they are SICK of buying systems over and over, and they want something that will LAST for a few years before they have to plunge AGAIN, and if the Rev has crappy looking games,
ALL OF THAT IS GOING TO HURT NINTENDO.
But Nintendo is so BLINDED by the idea that Nintendogs selling well in Japan is indicative that there's all these vast, untapped wells of gamers, just waiting for someone to shove a hose up their asses and suck out gobs of money.
I don't buy it. I think the game industry is not going to continue to grow. No industry can. It crashed once in the US already, and I'll be damned if it doesn't do it again. And right now Nintendo can't sit back and tell itself there's no invisible ceiling, because there
is, and pretending that it's not there is going to ruin you in the end.
How are third parties reacting to this nonsense about power? My guess is that they are groaning. They don't want to write this brilliant engine and then have to scale it back for the Rev. And so they'll look at userbase sizes and they'll pick and choose what is best. My honest guess is that 360 and PS3 will be far closer this time around, given the name recognition of Halo and the headstart by Microsoft. And if that's the case, if Nintendo's userbase isn't comparable to the sizes of MS and Sony, third parties will drop ship FAR faster than the Gamecube and N64 saw. At least with the GC, if you took the GC and optimized it, it looked as good, if not better, than either the Xbox or the PS2.
I am not a graphics whore. But guess what - normal people are. And normal people are running the damn game here. Companies respond to normal gamers. This is why Prince of Persia looks like a douchebag now. This is why Grand Theft Auto is so popular. This is why Halo, despite being a mediocre game at best when compared to PC FPS games, is the king of console FPSs. And companies will CONTINUE to follow those mentalities set by the majority - bigger, bagger, meaner, gorier.
And by the time Nintendo finally gives into this, it will be too late.
I think the Rev can survive, but barely. And I think the moment Nintendo starts having unprofitable quarters, they'll rethink what they did and spank themselves.
Ok, I'm through playing devil's advocate for now. I hate reading and writing this stuff myself, because I so desperately want Nintendo to succeed. If they can do it in other markets and with new people, fine. But they are not, NOT, it looks like, even trying to compete with Sony and MS. I fully believe that graphics will quickly fade as the buzzword and the benchmark, but given that right now they ARE the end-all-be-all argument, whether us internet-goers know it or not, Nintendo CAN NOT afford to piss around with this "we'll still do our own thing" sh*t.
Get with the program, Nintendo. Either get your system out fast, launch with an array of must-have games, or beef up the performance. You have every chance to get your ass in gear. You've HAD every chance.
Please, PLEASE re-think this decision. You can't float your own system anymore. You just can't.