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The Nintendo (OTCPK:NTDOY) Wii isn’t clinically dead yet, but its best days are well behind it. Sales are massively down, and with that, so are Nintendo’s profits and their share price. So they must do something soon, not so much for their gaming audience and fanboys, but rather to keep their investors happy.

The Wii was always just Gamecube V1.5. It was not truly a machine of the current generation like the Sony (NYSE:SNE) Playstation PS3 and the Microsoft (NASDAQ:MSFT) Xbox 360. It lacked the power and it lacked the HD graphics. But to make up for this it was cheaper, it had that breakthrough gesture interface and it had a catalogue of amazing Nintendo first party games that were must haves for any keen gamer.

The problem now is that the Wii no longer looks cheap, the cupboard is pretty bare of first party titles (most third party titles having missed the mark) and the gesture interface is looking old hat compared to what the competition are about to unleash.

The people that run Nintendo are not fools, they know all of this better than I do. So it is obvious that the successor for the Wii is already designed, that the first party studios are working on games for it and that production is just about to start. So the Wii will be discontinued with about 68 million units made, it will be interesting to see if the Xbox 360 can catch up with this figure over the next five years.

The new machine, if Nintendo keep to their previous naming rules, could well be called the Super Wii. Moore’s Law tells us it will be about four times more powerful than the Wii. And the market tells us that it will be HD. Obviously, it will be backwards compatible. But this specification, on its own, will not be enough to compete. Nintendo need to do more. Much more.

Satoru Iwata is the president of Nintendo and he has just given an interview that reveals much of their thinking. It is in Japanese but with the magic of Google Translate you can read it here. And he says that HD is not enough, that Nintendo will be doing something new.

Over three years ago I wrote an article in this blog entitled What is Nintendo? That article is just as true now as it was then, and mirrors much of Satoru Iwata’s thoughts. The key here is that Nintendo is an entertainment company first and foremost, they are not a hardware or a software company, it is just the entertainment that matters. And they use technology and innovation to provide this entertainment.

So I don’t know what to expect. They know that they need to innovate, so they could do just about anything. The only thing that is for sure is that it will be fun.

Disclosure: No position

Source: Nintendo Needs to Innovate as Wii Sales Wane