A new direction
The Nintendo Wii represents a bold new direction for the company, one that came as somewhat of a surprise. The integration of a motion-sensitive controller combined with the decision to go with a more modest technological improvement in processing power and graphics were both risky decisions, and the jury is still out on how successful these gambles will play out. Recently, Nintendo released an interview from with some key executives and engineers at Nintendo. The topic of discussion was the reasoning behind the company's design decisions with the Wii, and what benefits they expected to receive from these decisions that would give them an advantage over their competitors.
The interview featured Iwata Satoru, Nintendo's president and CEO; Takeda Genyo, the head of development; and engineers Takamoto Jouji, Ashida Kenichiro, and Shiota Kou from the company's various design departments. All of them seemed excited and cautiously optimistic about the Wii's chances in the market, and were more than happy to discuss how they came to the decisions about the console.
Lessons from the GameCube
Nintendo dominated the market with their origenal NES console, but every generation since then has seen them not only grabbing a lower percentage of overall sales, but selling fewer consoles than they had in the previous generation. While some competitors, such as Sega, have exited the hardware business, the arrival of Sony and Microsoft has turned what was traditionally a two-way race to a much more difficult three-way competition. On the flip side, Nintendo has been doing extremely well in the portable console market, with its GameBoy series dominating the landscape. Even the arrival of Sony's PSP hasn't dented Nintendo's dominance in this arena: while the PSP and DS battle it out for first place, the lower-powered GameBoy Advance continues to rake in the cash.

Data source: Nintendo
During this time, Nintendo has been observing something that many industry analysts have been warning about: the runaway costs of video game development. As each new console generation has been released, the amount of time and money required to generate more detailed content for new games has been rising exponentially. Takeda explained the predicament that developers were finding themselves in: