How Do Traditional Gaming Companies Avoid Being Bugging Whip Manufacturers?

There have been a series of really good posts from VentureBeat around the legacy platform leaders (e.g, Nintendo, Sony, etc).  For example, the recent posts on Sony's Vita as an example of the how it will be nearly impossible for dedicated gaming handhelds to thrive in a tablet world.  The math is just plain obvious – 1.8M Vitas sold, 10.5M Nintendo 3DS', and 12 million iPads in Q1 of this year.  I recently posted on this very same topic a couple of months ago which included market share numbers for smartphones, tablets, dedicated game handhelds, and consoles. 

It is very hard to cannibalize your base business but it’s foolish to deny fundamental secular math in the gaming industry — tablets and smartphones are the consoles of the future.  It’s even more alarming when you read that 75% of gamers will not purchase the upcoming Nintendo Wii U console as referenced in this study.  In fact, Electronic Arts (EA) is even trying to build a next generation console in an effort to preserve its major video game franchises such as Madden NFL. 

If I were looking to down the barrel of such huge hegemonic secular market pressures as these gaming giants are, I would counsel embrace the market trends and do the following:

1. Build an Android tablet – if you can't beat the trend then join them.  Let Google own the OS while you focus on specific hardware gaming hooks and features in the hardware.
2. Build a better ecosystem – there is a huge Android ecosystem.  I would build a fantastic pure gaming appstore that invites developers into your new Android gaming environment with open arms.  I’d build fantastic gaming discovery, meta-level identity and achievements, etc.  In other words, figure out how to make the thousands of Android gaming developers successful.   Add a social networking layer and in essence create a better Xbox LIVE-meets-Facebook social gaming experience.  Heck, take less than a 30% cut to get developers excited.
3. If you own IP, keep it closed – if you own a mega property (e.g, Super Mario), then keep it in your ecosystem.  That is a huge asset and a beloved game IP that can help you in my recommendaitons above.  Make your own IP as one of many motivators for people coming to your platform.  Be careful to not completely lock out other game developers — why not put special hardware buttons and/or screen elements to launch your games on the Android device, but, have a democratic (or fairly biased) appstore.
4. Separate P&L, separate marching orders – I wouldn't try to have the innovators and market disruptors exist physically or fiscally near the traditional P&L.  Organisms like traditional businesses have a tendency to deploy antibodies designed to kill innovation or new business upstarts.

Most great companies that have fallen were victim to the inability to cannibalize themselves. Refusing to see secular trends has been the downfall of many great companies.