Nintendo is further segmenting the market, according to at least one analyst

According to Kaufman Bros. Analyst Todd Mitchel, Nintendo’s success with the Wii and DS might come at the expense of third-party publishers who hope to gain traction on the these platforms. In his own words:

The DS and the Wii are taking the video game industry by storm. Both appear to be bringing new gamers into the market. However, this may not be a positive dynamic for the major video game publishers. Nintendo has not only increased the size of the market, but it has also re-segmented it in its own favor, in our view.

Nintendo is dominating software sales on its popular hardware platforms, leaving the publishers with a smaller slice of an only somewhat incrementally larger pie. Moreover, we feel that the likely shorter product cycles of Nintendo’s platforms puts the publishers in permanent catch-up mode.

We think the upcoming releases of Super Mario Galaxy and Metroid Prime 3: Corruption will highlight this phenomena this holiday season.

As Next Generation points out, Mitchell is talking about the stranglehold that Nintendo’s first party games have on their custom piece of the pie.

More, after the jump. 

On the surface, he makes what seems to be a valid point. After all, Nintendo is very much taking over the market (even if it’s momentarily) right now, and they do seem to flourish with those blessed first-party titles that crush most other offerings of the third party variety. Taking into account that the combined software numbers of the DS and Wii for the 2007 fiscal year translated into about 152 million copies sold, and how first party Nintendo titles make up the vast majority of those titles, it’s not a complete stretch to say that Nintendo has control over at least 50% of its own market share on the software side.

To a developer who is trying to succeed on these platforms and make a profit in the process, the odds are very much stacked against them. In a sea of games that will undoubtedly be released for the DS and Wii (well, maybe) in the not so distant future, not to mention the limited budget that many families are finding themselves in, it’s going to be difficult for a publisher to have their game go up against the popular Nintendo titles and win.

Then again, business is business. If you take this away from Nintendo, the company might cease to exist. It is the equivalent of criticizing McDonalds for having trinkets packed in with their Happy Meals, or asking the dairy industry to give up its ads for milk mustaches. They have a limited market, and it has brought them much success in the process. By all accounts, most people would say that all is well.

There are two other readily available next generation platforms for  lesser publishers to reach their target audience with, so what’s the big deal? Two or three years from now when Sony hits it’s stride, and the illustrious Xbox division finally starts to make poor old Billy some profits, the Wii might very well be the furthest thing from peoples’ minds.

Nintendo is focusing on its strengths, and is making a lot of money doing it at the moment. As far as fans are concerned, Nintendo is aiming straight for the heart, and taking names later