Overall, the video game industry has never been in better shape. Nowadays there are more devices than ever capable of playing games, and games have been able to reach audiences that would have been impossible ten years ago.
But this overall statement includes all gaming segments including mobile and PC. I'm going to assume that these questions are about dedicated gaming hardware like consoles and handhelds. When discussing that part of the market, we look at is as three distinct segments: dedicated handhelds, home consoles and Nintendo home consoles. Of these, the dedicated handhelds are crashing due to people seeing smartphones and tablets as superior substitutes. This decline may be slow, but it is inevitable and there's nothing Nintendo can do about it until dedicated handhelds fall to their natural equilibrium level. It's possible that the equilibrium level might end up being too small to sustain the segment
It's a similar story with Nintendo home consoles. There's a perceptible decline there as the Wii went from a 100M user base to the Wii U's less than 15M user base. Nintendo has more control over what happens in this segment, but the boat is tilting in the wrong direction and it's going to be very hard to right.
The other home consoles, the Xbone and PS4, are in a much better shape. While there's a possibility that they may not sell as well as their predecessors and that software sales will be weaker, there are no signs of a crash for them.
So really, what weaknesses exist in the dedicated gaming industry apply mostly to Nintendo, and the ones they're going to be saving are themselves. I feel that a lot of Nintendo's problems stem from their business philosophy and that they haven't done much to address them. And so I think it's safer to be pessimistic about their prospects. At the very least, it's pretty clear that the challenges laid before Nintendo are monumental and they're going to have to be more clever than they've ever been to overcome them.
