Nintendo shouldn't rush to release the Wii 2

According to analyst Colin Sebastian at Lazard Capital Markets, the next generation of video game consoles could start around 2012. But in an attempt to jump-start the next-gen and add some functionality that it's already lacking, Sebastian believes a Wii follow-up could be first to the market.

"One possible exception to console timing may be Nintendo, which could opt to upgrade the Wii with faster processing power, DVD capability and/or greater storage," Sebastian said.

Granted, that upgrade sounds more like a Wii 1.5 than a Wii 2.0, but it still highlights an important point: should Nintendo be the first to enter the next-gen fray or the last? Ostensibly, this analyst thinks it should be first.

I think it should be last.

In the video game business, it doesn't necessarily pay to be first. Some think that getting in early means capturing customers that are ready to move on to the next-generation and also allows the first company out of the gate to capture market share and customer wallets before any other organization.

But being first is not always so great. Microsoft was first to this generation because it had to be. The company was woefully behind Sony during the last generation and it figured that if it could solidify its brand before any other company, it would be able to gain more market share and compete more effectively.

Generally speaking, that's the mantra the trailing companies promote. "Well, we're really far behind this generation, so why don't we hurry up and get to the next one and try our luck there."

But Nintendo doesn't have that predicament. The Wii is the winner of this generation and easily eclipses its competition in hardware sales each month. Why should it want to move to the next generation first just to add DVD capability? That's not hurting the company now and the last thing it needs is to look like it's abandoning the first console the company has experienced such success with in years.

And why would Nintendo want to tip its hand so soon and let its competitors see what it has in store for the Wii 2? As the leader, it should be more than willing to wait and see what its competitors are offering before it jumps into the fray.

So what will we see in the Wii 2? There's no telling. But rest assured that it will undoubtedly feature Nintendo's motion-control and probably include DVD (not Blu-ray) compatibility. Nintendo is inexorably tied to its motion capabilities and its desire to make its console affordable to the mass-market--something Blu-ray capability may not necessarily provide. Worse, it doesn't want to pay off its competitor to do it.

All this is not to say that Nintendo won't update its product line over the next few years--it likes to do that quite often to extend the life of its hardware--but to say that a Wii 2 should be the first console release in the next generation simply doesn't make sense from a business or technological standpoint.

With such a huge lead over its competitors, the onus in the next generation isn't on Nintendo, it's on Microsoft and Sony. Realizing that, one of those companies needs to get to the market sooner and try to fend off Nintendo. Not the other way around.

Check out Don's Digital Home podcast, Twitter feed, and FriendFeed.