|Nintendo needs more fans like these.|
It makes sense, I guess, from Nintendo's viewpoint. They have proven their wholehearted resistance to the idea of distributing games digitally, preferring to keep the retail network happy. It is true that downloading multi-gigabyte games is a pain in most parts of the world, for mos users (if not downright impossible for some). This move will probably increase reliability somewhat, although costwise it may not be much of a savings over a small hard drive.
Still, I think in the longer term this may throttle Nintendo's ability to sell downloadable content, which is a vast source of future profits with tremendous growth potential. Then again, I'm not sure that a new console will do very well regardless of the hardware specs; the console era may well be pretty much over, with the survivors battling over shares of a shrinking market. Certainly it's hard to see this right now, and in the hot PR glare coming from E3 the true shape of the future is going to be very hard to discern.
Perhaps if Nintendo were to open up development to a wider array of developers, and get a vast number of low-cost smaller games coming for their console, this could work out well. But that would require a huge change in how Nintendo likes to do business, and they'd give up a great deal of control. I consider that unlikely at best, especially given their previous statements about inexpensive games. There's nothing like diminishing slaes and profits to focus your attention and compel changes of direction though, and Nintendo's seen their profits fall 66% over last year, with sales down by 30%. The lackluster launch of the 3DS, and its abrupt sales slowdown, must be a deep disappointment to Nintendo. Perhaps it may lead them to consider making the deep changes to their business models that I think the changing market demands.
Though even with all these concerns, I'm pretty sure Nintendo will have a better E3 than Sony.